Some Great Homes Coming on the Market Soon

Hello Friends:

First I apologize for being remiss and not posting more. I will do my best to maintain a page that is updated on a regular basis. I hope everyone had a great Thanksgiving and are preparing for a festive Christmas!

I wanted to give you all a "heads up" on some homes I that I will be putting on the market shortly. These four homes are located in great locations of Sacramento. I will be listing homes in the Elk Grove, Roseville, North Natomas and Bridgeway Island (West Sacramento) areas. The homes will be priced:

North Natomas: $179,900 for a 3 bedroom, 2 bath home with 1500 sf! This home is in show room condition and is located on a quiet street. This home has an open floor plan. Recent comps show that the home should be valued at $192,000.

Roseville: $340,000 for a 5 bedroom, 3 bath home. Located close to shopping, schools, parks and transportation. If you act now, you can pick the color of paint and carpeting. Great floor plan with a bedroom and bath downstairs. Big open kitchen. Recent appraisal done at $370,000!

West Sacramento: $269,000. This large 4 bedroom home is located in the Bridgeway Island area. New development! Open and spacious. This is an exceptional buy! Some homes in this area have sold for more than $300,000.

Elk Grove: $224,900. 4 bedrooms and 3 baths with a pool! This home is loaded with upgrades! Chance to get a great buy before it hits the market! Open floor plan with lots of natural light.

Call me for more information. Once again, these homes will be hitting the market soon. I hope you are all enjoying your day!

I am very Bullish on Sacramento.

David Ohara

Prudential Dunnigan

dwo34@aol.com

@dwo34

916-600-9495

What is HAFA?

Hello Friends:

I have been getting some emails and calls from friends and clients regarding a program called HAFA. They all asked the same thing "David, what is HAFA, and can this program help us?" I wanted to get the specific details directly from the Housing and Urban Development. Here is what they have to say about HAFA.

In early 2009, the National Association of REALTORS® (NAR) urged the U.S. Treasury Department, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac to improve the short sales process.

NAR’s concerns were first addressed on May 14, 2009, when the Obama Administration announced the outline of a program to provide incentives and uniform procedures for short sales and deeds-in-lieu of foreclosure (DIL) under the Making Home Affordable Program.

The Obama Administration released guidelines and uniform forms for its Home Affordable Foreclosure Alternatives Program (HAFA) on November 30, 2009 and released an updated version on March 26, 2010. April 5, 2010 was the effective date for the program.

Modified HAFA rules for loans owned or guaranteed by Fannie Mae or Freddie Mac were still being developed as of April 28, 2010 (check www.realtor.org/shortsales for updates). HAFA does not apply to FHA or VA loans.

About HAFA

HAFA is a program primarily designed for homeowners who are unable to stay in their home even with a loan modification under the Home Affordable Modification Program (HAMP). Under HAFA, homeowners may be able to avoid a foreclosure by selling the home as a “short sale” (where the value of the home is less than the remaining amount of the mortgage) or by transferring title to the lender through a process called a “deed-in-lieu of foreclosure.”

HAFA: Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

Uses borrower financial and hardship information already collected under HAMP.

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds and acceptable closing costs).

Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holders receive an incentive under HAFA, those debts as well (no cash contribution, promissory note, or deficiency judgment is allowed).

Uses a standard process, uniform documents, and deadlines.

Provides financial incentives: $3,000 for borrower relocation assistance; $1,500 for mortgage servicers to cover administrative and processing costs; and up to a $2,000 match for mortgage investors for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders (up to 6 percent of the remaining balance of each junior lien).

Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The program sunsets on December 31, 2012.

TIMELINE

Determination of Eligibility and Notification

Servicers must consider HAMP-eligible borrowers for HAFA within 30 calendar days after the borrower does at least one of the following: Does not qualify for a HAMP trial period plan Does not successfully complete a HAMP trial period plan Is delinquent on a HAMP modification (misses at least 2 consecutive payments) Requests a short sale or DIL

If the servicer determines a borrower is eligible based on its written policy and has not already discussed a short sale or DIL with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar days to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer. If the borrower asks for consideration but a short sale or DIL is not available, the servicer must inform the borrower with an explanation and provide a toll-free number.

Short Sale Agreement

If the borrower is interested in a short sale, the servicer fills out the Short Sale Agreement (SSA) and sends it to the borrower. The borrower has 14 calendar days from the date of the SSA to sign and return it to the servicer. The real estate broker also must sign the SSA. The SSA must give the borrower an initial period of 120 calendar days to sell the house (servicers may extend up to a total of 12 months, if agreed to by the borrower).

Sale Contract

Within 3 business days of receiving an executed sale contract, the borrower (or real estate agent) must submit a completed Request for Approval of Short Sale (RASS) to the servicer, including a copy of the sale contract and all addenda buyer documentation of funds or pre-approval/commitment letter from a lender all information on the status of subordinate liens and/or negotiations with subordinate lien holders.

Servicer Approval

Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advise the borrower (with a statement of the reasons in the case of disapproval).

Closing and Lien Release

The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 calendar days from the date of the sales contract unless the borrower agrees.

The servicer must follow local or state laws to time the release of its first mortgage lien. If local or state law does not govern, the servicer must release its first mortgage lien within 30 business days. Investors must waive rights to seek deficiency judgments and may not require

a promissory note for any deficiency. These rules also apply to junior lien holders receiving incentives.

NAR FAQs

HAFA is a complex program with nearly 50 pages of guidelines and forms. To help you better understand the process, NAR has prepared some frequently asked questions that address the basics. For more information on HAFA and more detailed NAR FAQs, please visit www.realtor.org/shortsales

Who is eligible for HAFA?

The borrower must meet the basic eligibility criteria for HAMP: Principal residence (including certain vacant properties for borrowers who recently moved at least 100 miles for employment and meet program requirements) First lien originated before 2009 Mortgage delinquent or default is reasonably foreseeable Unpaid principal balance no more than $729,750 (higher limits for two- to four-unit dwellings) Borrower’s total monthly payment exceeds 31% of gross income

How is the program being implemented?

Supplemental Directive 09-09 (revised March 26, 2010) gives servicers guidance for carrying out the program. Check www.realtor.org/shortsales for future updates.

A short sale agreement (SSA) will be sent by the servicer to the borrower after determining the borrower is interested in, and eligible for, a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply.

After the borrower contracts to sell the property, the borrower submits a “Request for Approval of Short Sale” (RASS) to the servicer within 3 business days for approval. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The servicer must still consider the borrower for a loan modification.

What are the steps for evaluating a loan to see if it is a candidate for HAFA?

1. Borrower solicitation and response

2. Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or deed in lieu of foreclosure (DIL)

3. Use of borrower financial information from HAMP

4. Property valuation

5. Review of title

6. Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).

What are the HAFA rules regarding real estate commissions? The servicer specifies the amount of commission in the Short Sale Agreement (SSA) as a “reasonable and customary” closing cost. The borrower and the prospective real estate broker may negotiate with the servicer on the terms of the SSA, including the commission. There is a different rule if the borrower submits an executed sales contract to the servicer for approval before a SSA is executed. In that case, the sales contract is submitted to the servicer with an Alternative Request for Approval of Short Sale. The amount of the commission in that case is the amount negotiated in the listing agreement, not to exceed 6 percent. Neither buyers not sellers may earn a commission in connection with the short sale, even if they are licensed real estate brokers or agents. They may not have any side deals to receive a commission indirectly.

What else should I know? The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship. The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, forgiven debt will not be taxed if the amount does not exceed the debt that was used for acquisition, construction, or rehabilitation of a principal residence. Check with a tax advisor or the IRS. The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment, which may hurt credit scores. Buyers may not reconvey the property for 90 days (no “flipping”).

If there any additional questions please let me know. I am here to help and provide as much information as possible.

It is May 26, 2010, and I am BULLISH on Sacramento!

David Ohara

@dwo34

dwo34@aol.com

More Photos of Kraze Apparel

More great designs by Peter Tsuru at Kraze Apparel!

Remember to visit his

website at:

krazeapparel.com

Kraze Apparel - The Ultimate in Island Designs!

Good Monday Morning Everyone!

I hope you all had a great weekend! I want to introduce you to my good friend Peter Tsuru and his company Kraze Apparel (pronounced CRAZE.) I met Peter through Twitter and quickly formed a great friendship. Peter embodies the term "Aloha Spirit" and I am proud to call him a great friend. Peter has some of the nicest designs I have seen. I have been to Hawaii on several different occasions and am very fond of "Island" designs. Some of my favorite designs are from Local Motion, Hawaiian Island Creations, Matsumoto's Shaved Ice, TC, and Quicksilver. Peter's designs rank up there with all the "bigger" companies. I recently interviewed Peter for this blog.

@dwo34: Peter, tell me how you came up with the name Kraze Apparel?

@PT: We wanted a name that represented our apparel line with a trendy feel to it. We found the word Kraze which is a play on words from "craze" meaning fashion or trend.

@dwo34: Peter, what inspires your designs?

@PT: Our daily surroundings in Hawaii inspire our designs. The blend of cultures, music, art and lifestyle reflects in all our work. Every visual object to me can be interpreted into a design.

@dwo34: Having been to Hawaii several times, I can see the island influence in your designs and like I have always told you "Your designs are top notch" my friend!

@PT: Mahalo brother!

@dwo34: Peter, how long has your company been in existence?

@PT: Kraze Apparel has been in business for 3 years.

@dwo34: What has been your greatest moment in business?

@PT: The greatest moment in business has been customers coming back to us because they love our designs.

@dwo34: Tell us some of your goals with Kraze Apparel

@PT: We would like to see Kraze Apparel expand to more retail stores, the outer islands of Hawaii and to the west and east coasts on the US mainland. We will be venturing into toddler to youth clothing, board shorts, caps and accessories. With everyone going green, we would also like to start heading in that direction. As we mature as a business, we are going to create a foundation to give back to the community.

@dwo34: Right on Peter! I have a great feeling that your brand will do very well in the mainland and there is a serious need for some "fresh" designs!

@PT: Thank you for your ongoing support David, it means a lot to us here at Kraze Apparel.

@dwo34: Peter, let everyone know where can people order your shirts?

@PT: People can order our shirts online at http://www.krazeapparel.com.

@dwo34: Also people can see you at Twitter @KrazeApparel on on Facebook (Kraze Apparel or Peter Tsuru).

@dwo34: Peter, tell me which is your favorite design and why.

@PT: I really don’t have just one favorite design. I enjoy all the designs because each design has its own personality.

@dwo34: I agree with you Peter. As you know, I have about 10 Kraze Apparel shirts and I get complimented where ever I go. I wish you and Kraze Apparel the best of luck!

@PT: Mahalo and aloha to you David.

Peter is such a nice guy. I am proud to call him my friend. Please visit his site, I am sure you will love his designs and want to place an order. Tell him David Ohara sent you! Have a great week my friends!

It's April 12, 2010 and I am very Bullish on Kraze Apparel!

David Ohara

@dwo34

dwo34@aol.com

FHA 203 "Fixer Upper" Loans

Good Thursday Everyone!

I am ran into this informative article on FHA 203 financing. The program is designed to assist in the borrower in "fix up" costs associated with a property he/she is purchasing. This is good reading.

RISMEDIA, March 27, 2010—(MCT)—The word “as-is” can indeed be one scary phrase. Especially when buying a home in today’s market where foreclosures and short sales that need fix-up work are plentiful.

But a little-known Federal Housing Administration (FHA) loan program that’s been around since 1978 can help take the sting out of “as-is.” Only 219 borrowers took advantage of the FHA’s 203k program in 2009. Not that many lending and real estate professionals are aware of the program, say observers.

Last year, Tom Meyer found a classic Oakland, Calif., home built in 1925 near Mills College he liked a lot. As a short sale it was priced right and about half the original asking price. Trouble was, the place needed some fix-up work—foundation improvements, dry rot work, a new roof over the garage and other improvements.

With the help of the FHA’s 203k renovation financing loan program, Meyer folded about $100,000 worth of repairs and improvements into his $422,000 mortgage. He had bought the home for $320,000. “I would not be able to pay a contractor $100,000 and buy a house at the same time,” said Meyer, who works in corporate media at Shaklee’s Pleasanton headquarters. “It had been essentially allowed to start falling apart over the last 20 years.”

He had rented in San Francisco for 25 years before moving into his new digs last September with his girlfriend, Cathy Keating. “We like old houses, and a great benefit of this program is that it helped us keep a beautiful but deteriorating house from deteriorating further. With the work we did, we expect it to still be standing and beautiful 80 years from now,” he said.

Renovation financing through the 203k program allows the costs of needed repairs and improvements to be included in the FHA federally-insured loan amount instead of having the buyer come up with cash or a separate loan to do the work.

“This is a perfect loan for an as-is situation,” said Kristine Marr, a loan officer with Prospect Mortgage in Lafayette, Calif. “It’s not a new loan program, although I think it’s going to have a lot more use today because we have so many foreclosures and bank-owned properties. You go into lots of homes and see people have yanked out stoves and ovens and fixtures and sinks.”

The work has to be done within six months after escrow closes. Borrowers have the option of putting up to six months of mortgage payments on the end of the loan if they don’t want to live in the house while the work is being done.

“Renovation financing is a program that allows you to not only finance the purchase of a home but finance any repairs and/or improvements. It provides buyers with a responsible way to purchase a fixer-upper property,” said Luis C. Munoz, who helped Meyer with the loan and is a renovation loan specialist with the Oakland branch of Mason-McDuffie Mortgage Corp. Munoz also gives presentations about the program at monthly home ownership workshops sponsored by the Unity Council, an Oakland-based nonprofit.

At a time when equity loans are hard to get, the program can also be used as a refinancing vehicle for borrowers who want to do repairs and improvements, provided the value of the home is greater than the value of the loan. “At the same time as you refinance, you pop in the extra dollars you need for whatever you want to do,” Marr said.

FHA home loans require certain health and safety standards be met and that needed repairs identified during the inspection process be completed before escrow closes. However, minor repairs and improvements costing between $5,000 and $15,000 can be done after escrow closes for borrowers who opt for a streamlined repair program.

A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures, said Sheri Powers, director of the Homeownership Center at Unity Council.

The loans can also be used to pay for improvements such as new appliances, second-story additions, remodeled kitchens and bathrooms, and skylights, just to name a few examples. “Property repairs cost money and they want to make sure people using their loan program are going to be in the home in long run and not just the short run,” Powers said.

The loans have become more popular since home prices started falling and FHA lending limits were raised a couple years ago but are still a tiny sliver of overall FHA loan volume. Last year, 203k loans accounted for 219 mortgages in the Bay Area, compared to 35 in 2008, one in 2007 and none in 2005 and 2006, according to Department of Housing and Urban Development statistics. “It’s making a comeback,” said Powers.

Marr said that 203k financing is not for everyone. A buyer will have to work with contractors and may have to wait several months before moving in, she said. And there is no guarantee they won’t be outbid by an investor for the property. “A lot of listing agents are preferring the investors, because the investors tend to be all cash or 50% cash. That’s always hard to compete with,” she said.

Eve Mitchell

(c) 2010, Contra Costa Times (Walnut Creek, Calif.).

It is Thursday, April 1, 2010 and I am Very Bullish on Sacramento!

David Ohara

@dwo34

dwo34@aol.com

How Much Will the TARP Bailout Cost?

Good Evening Everyone!

This is a great piece I wanted to share with you. It talks about the actual cost of the Federal Bailout money. I encourage you to read.

Price tag of TARP bailout: $109 billion!

By Annalyn Censky, staff reporterMarch 18, 2010: 10:12 AM ET

NEW YORK (CNNMoney.com) -- The government's unprecedented $700 billion economic bailout will actually cost taxpayers just 16% of that total, according to a Congressional Budget Office report released Wednesday.

The Treasury's losses on the Troubled Asset Relief Program (TARP) will total $109 billion over the program's lifetime, CBO latest estimates show. That's up $10 billion from the agency's last projection, released in January.

CBO, which is charged with reviewing congressional budgets, has released a series of TARP cost calculations in the 17 months since the bailout began, each time updating its numbers with the latest data. At one point CBO expected the cost to be as high as $356 billion, but faster-than-expected bank repayments and other cost adjustments have drastically reduced the expected price tag.

TARP's two big moneysuckers are AIG and the auto industry.

AIG got TARP money in two forms: the government bought $40 billion in preferred stock and created a $30 billion line of credit for the company. CBO previously estimated the AIG bailout would cost the government $9 billion, but AIG hasn't paid the Treasury the quarterly dividends it owes. AIG's weak financial position prompted CBO to increase its loss projection to $36 billion -- more than half of the AIG bailout cost.

Other major losses -- a total of $34 billion -- will come from TARP assistance to the automotive industry, CBO said. The government committed $85 billion to bailing out the automakers.

On the flip slide, the highly unpopular capital infusion for banks will actually net the government $7 billion, CBO expects -- even including a $2 billion loss from CIT Group (CIT, Fortune 500), which declared bankruptcy, and Pacific Coast National Bancorp, which was taken over by the Federal Deposit Insurance Corporation.

CBO isn't the only agency attempting to tally up TARP's cost. The latest estimates from the Office of Management and Budget, released in early February, predict TARP will cost $18 billion more than CBO's estimates. The numbers from the two agencies differ because of different assumptions about the cost of some items and a varied timeframe for some of the data they evaluated.

Foreclosure help forecast

As for President Obama's mortgage modification program, the CBO estimates that the Treasury Department will use no more than $20 billion of TARP funds, less than half of the $50 billion originally allocated. That's because the CBO expects many fewer people will participate in the program than the government originally expected, a view held by many housing industry observers.

When Obama announced the program in February 2009, he said up to 4 million people could save their homes through the loan modification program, which lowers eligible borrowers' monthly payments to no more than 31% of their pre-tax income. But more recently, officials have backtracked and said up to 4 million people could qualify for trial modifications, during which loan servicers assess their borrowers' eligibility and ability to pay.

Through February, around 170,000 distressed homeowners have received long-term modifications under the program.

Another $1.5 billion in TARP funds will be used to provide grants to state housing agencies in California, Arizona, Nevada, Florida and Michigan. These agencies are tasked with coming up with programs to assist the unemployed, the underwater who owe more than their homes are worth, and the second-lien holders.

CNNMoney.com senior writer Tami Luhby contributed to this report.

It's March 18, 2010 and I am very BULLISH on Sacramento!

David Ohara

@dwo34

dwo34@aol.com

Customer Service Lacking in Real Estate

Good Tuesday Morning Everyone!

I came across this article from RISMedia addressing the issue of customer service in the real estate industry. I knew from my personal dealings with certain agents in the Sacramento area, that service was lacking, but I did not know it was this shabby. My dealings with with these certain agents left me asking "How could these buyer's possibly want to work with their agent?" Poor communication skills, terrible penmanship, lack of understanding of the real estate purchase contract, leaving doors open and unlocked, and the list goes on and on. Folks, if you are serious about buying or selling a home, you need to connect with a Realtor who has the expertise to represent you properly. A poorly written offer or lack of communication can mean the difference between you having your offer accepted or declined. Here is the article from RISMedia.

RISMEDIA, March 16, 2010—It doesn’t take a genius to know that events of the past few years have greatly affected the public’s view of real estate agents. Now that image is below that of used car salesmen (except, perhaps, Toyota used car salesmen!) and many are publicly stating that the agent’s time is over, that maybe it’s time to take corrective action. What do you think?

Before exploring that, however, you should know that the study referenced above was conducted by the California Association of Realtors and reported in many newspapers (I’m quoting the Orange County Register, here). “California leads the nation,” we used to say around here, but lately, its in dubious distinctions like this one, it seems. It is possible that in other parts of the country, dissatisfaction is not quite this high.

The study reported on consumer responses to one simple proposition: “Yes, I would use the same agent” over the six-year period from 2004 to 2009. It reports that 79% of respondents said “Yes” in 2004 but only 22% said “Yes” in 2009. Statistics like these do not inspire loyalty campaigns or much hope for referrals, do they?

What happened?

According to the study, 64% of sellers said “the house took too long to sell” and 51% said, “We didn’t get the price we wanted.” Thus, the disaster fomented by Wall Street has been neatly transferred onto the backs of real estate agents. It’s no comfort to realize that while some Wall Street ‘Investment Banker’ is spending his seven-figure bonus on that house on the Vineyard and the newest Bentley, the public’s anger at the financial crisis has trickled down to those not responsible for it.

The very people you are working your butt off for, blame you for their unrealistic expectations and in many cases, agents are enabling that by not setting sellers straight on the new realities of real estate pricing and financing. It is doubtful that the consumer will wake up anytime soon. Anyone with an ARM can no longer afford can blame you. Anyone in a house worth 30% less than what they paid for it can now blame you as being the reason for their dilemma. That’s much easier than blaming their own greed or naiveté, of course, but who ever wants to take personal responsibility anymore? Certainly not consumers, it would appear!

Short-term consequences for real estate companies

Branding takes a hit

The financial crisis that produced the “Hate your real estate agent” trend also has reduced the power of Internet corporate real estate brands. Consumers today are more attracted to individuals than entities: no one cares about being friends with a company and no one thinks a company will treat them as well as a real person will (i.e., a buyer will search for “Wasilla AK Real Estate,” not “International Behemoth Real Estate agent in Wasilla AK”). The Internet shopper resists and resents any effort to make them go through even one unnecessary step to acquire the information they want and that includes being driven through hoops on the Intergalactic Amalgamated Real Estate Behemoth websites. The consumer today is more likely to identify with an individual agent than a corporate leviathan. For the individual agent, this is good.

Personal response and service have become vital to success

In our business, we see structures in brokerages and corporations that literally make us shake our heads and wonder how those organizations are surviving. One of these is the lackadaisical approach to inquiries from Internet buyers. Believe it or not, over 50% of Internet leads are never responded to in person and believe it or not, 50% of such inquiries are responded to in an average of 54 hours. This has enabled savvy agents to structure their leads and inquiries for their websites to be SMS texted to their powerful phones, where—with a simple touch—the inquirer can be called back in minutes. If you were an Internet buyer, would you wait days for a response that might never come or would you respond favorably to the agent who calls you personally within minutes and asks how they can assist you?

In the next few years, the business will return to a model where personal service is given at a high level and where the agent becomes the source for information. Just dumping people in an IDX or MLS doesn’t cut it anymore, folks—you must do the looking for them. For the hardworking agent, this is good.

More agents will develop the guts to just say ‘No’

When there’s nothing in the pipeline and the opportunity to take a listing for a property that is priced 30% higher than reality now dictates arises, it is very hard to walk away. After all, someone will take the listing, right? Please—let someone else take such listings. That same survey we’ve been referencing also revealed that an incredible 2 out of 3 homeowners originally listed their home with a different agent than the agent who had the listing when it finally sold. Imagine all the blood, sweat, tears and money wasted by agents who take unrealistically priced listings. This nonsense won’t stop until agents remember that a listing gained at an unrealistic price will only result in an unhappy customer, and another statistic for such studies. For the agent who wants to stay sane, this is good.

Long-term consequences

Skill, hard work and mastering technology to bring you prospects will become more important than spending hours blogging, posting listings, tinkering with websites and generally not selling. Technology that simply requires more involvement from the agent will languish – in large measure—because consumers aren’t driving the use of video, the endless hours of social networking, the ubiquitous IDX systems and other colossally unproductive drudges that agents are now told they must embrace; it’s the technology companies driving that.

The consumer wants help choosing a home and getting it financed from a knowledgeable and responsive agent. They want to pay a fair price; they want a deal that will appraise out; they do not want to waste their time on uneconomic transactions. Most of all, if they call or write in on your website, they want an instant and friendly response. In short, they want the service that used to be inherent in a real estate agent and they will continue to gravitate to a minority of agents who give such service. The Internet helps them find those agents, faster. Sometimes agents don’t know that their way has been made obsolete and they inadvertently give poor service. For example:

This week, an agent complained that he wasn’t getting sales for the Internet leads he was receiving. We asked him why he had not attended the free class on how to best follow up those leads. He replied: “I know how to follow up Internet leads! We send an immediate auto responder and put them on an MLS drip email system! I don’t need your @#%#@ training!”

Folks, kill all auto responders. Do not put people on drip email systems. Do not automate anything about the sales process until and unless you have spoken with the prospect and they have asked you to do so. This agent was wasting the fruit of his labors by not contacting people personally and consistently. Today, it’s a merciless marketplace and every one of those uncontacted leads is now speaking to another agent.

That’s just one simple example, but many others exist; repeat after me: “Succeeding today is about personal service, hard work, professional representation, and modest use of effective technology.”

Isn't this amazing! Remember, connect with a Realtor who can represent you appropriately and professionally. A home purchase is more than opening a lockbox and selling your home is more than putting a sign in the front yard. If you have questions about locating a Realtor in your area, contact me and I can connect you with a professional Realtor who will represent you well. Don't fall into the category mentioned in the article!

It is March 16, 2010 and I am very Bullish on Sacramento!

David Ohara

@dwo34

dwo34@aol.com

Home Buyer Tax Credit

Only a Very Little Time Remains!

Frequently Asked Questions

About the First-Time Home Buyer Tax Credit

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the $8,000 tax credit?
2. What is the definition of a first-time home buyer?
3. How is the amount of the tax credit determined?
4. Are there any income limits for claiming the tax credit?
5. The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher income limits retroactive?
6. What is “modified adjusted gross income”?
7. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
8. Can you give me an example of how the partial tax credit is determined?
9. How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
10. How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
11. What types of homes will qualify for the tax credit?
12. I read that the tax credit is "refundable." What does that mean?
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
16. I am not a U.S. citizen. Can I claim the tax credit?
17. Is a tax credit the same as a tax deduction?
18. I bought a home in 2008. Do I qualify for this credit?
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
20. HUD is now allowing "monetization" of the tax credit. What does that mean?
21. If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
22. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
23. How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
24. Does a married couple qualify for any home buyer tax credit in the following situation? Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years.

1. Who is eligible to claim the $8,000 tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.
   
   However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.
   
   Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.
   
   
2. What is the definition of a first-time home buyer?
   The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
   
   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
   
   
3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
   
   
4. Are there any income limits for claiming the tax credit?
   Yes. For sales occuring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
   
   
5. The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
   No. The new income limits are only applicable to purchases occurring after November 6, 2009.
   
   The income limits for sales occuring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
   
   
6. What is “modified adjusted gross income”?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
   
   To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
   
   
7. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
   
   
8. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
   
   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
   
   Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
   
   
9. How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
   The tax credit’s income limits were increased, the documentation requirements were tightened, and the program's deadlines were extended.
   
   
10. How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
    You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). Please note that although the Form is titled “First-Time Homebuyer Credit,” this is the correct form for claiming both the $8,000 first-time homebuyer tax credit and $6,500 repeat buyer tax credit.
    
    No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase. In cases where a HUD-1 form is not used, such as for construction of some new homes, you should attach a copy of the certificate of occupancy in lieu of the HUD-1. Homebuyers should be sure to read the instructions for the revisedIRS Form 5405 to be sure they meet the new program requirements.
    
    
11. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
    
    It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
    
    
12. I read that the tax credit is “refundable.” What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
    
    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
    
    
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April, 30, 2010).
    
    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. To provide proof of purchase, homebuyers must attach a copy of the HUD-1 Form or certificate of occupancy to IRS Form 5405.
    
    
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with an MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
    
    
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
    
    
16. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
    
    
17. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
    
    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
    
    
18. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
    
    
19. Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
    
    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
    
    In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
    
    
20. HUD is now allowing "monetization" of the tax credit. What does that mean?
    It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
    
    Under HUD’s guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.
    
    Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement. In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.
    
    More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
    
    
21. If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
    Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
    
    Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
    
    
22. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.


23. How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
    The buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.
24. Does a married couple qualify for any home buyer tax credit in the following situation? Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years.
    In this situation, the couple does not qualify for any home buyer tax credit. Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.
    
    Spouse A does appear to qualify for the $6,500 repeat buyer credit, but because Spouse B has not owned and lived in the same principal residence for at least five years, neither of them can claim the repeat home buyer tax credit.

The above information was provided by the National Association of Home Builders. If you have any additional questions or comments. Please let me know. Thank you and have a great day!

It's March 12, 2010 and I am very Bullish on Sacramento!

David Ohara

@dwo34

dwo34@aol.com