Photo Friday: North Baltimore County, MD

The picture above was taken on the Northern Central Railroad (NCR) Trail in Sparks, MD, between Sparks Road and Lower Glencoe Road. The river shown is the Gunpowder. The NCR Trail is a local favorite for walking, running and cycling. Fortunately, I was able to keep the kids out of the river.

Photo by Derek Massey on Posterous

Do I need to sell my house to get the $6,500 tax credit?

(Revised and Updated 11/19/09 at 5:00 PM)

As we discussed here, the First Time Homebuyer Tax Credit was extended and expanded on November 6th. Of the many questions posed by passage of this bill, the one that we have been asked the most is, "Does a taxpayer need to sell his existing house to be eligible for the $6,500 'step-up' tax credit?"

It appears the IRS just recently added the following Q&A item to their FAQ document, and the answer is: NO.

"Q: I’m already a homeowner. If I buy a replacement home after Nov. 6, 2009, to
use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?

A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home after Nov. 6, 2009, to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009."

You should still have your clients seek the advice of a trusted tax professional before making such a decision if the tax credit weighs heavily on her list of reasons to buy or not to buy. Have the buyer provide the CPA with the exact situation, and ask them to research before making the decision!

Thank you to James Carroll and Marney Kirk for the information you provided to help with this post.

More on HUD's Decision to Exercise "Restraint" in Enforcing New RESPA Rules

Last Friday HUD announced that it would exercise "restraint" in enforcing the new RESPA provisions set to go into effect on January 1, 2010 that deal with the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement. We passed this story along here.

What we have questioned is the effect of this decision: Does delay of enforcement mean a delay in implementation, or are lenders still going to go live with the new forms on January 1st?

We have received strong indication from industry resources such as First American and the American Land Title Association (ALTA) that this decision is not a delay in implementation, but merely a delay in enforcement. There are still some practical considerations in some jurisdictions which make full compliance with the new rules impractical or impossible, and HUD does not want to be imposing financial obligations against companies who cannot possibly follow the new regulations.

We will continue to monitor this closely so agents and brokers know what to expect as of the first of the year. Stay tuned...

FHA Does Away with "Second Appraisal" Requirement

Starting today, FHA will no longer seek a second appraisal for so-called "FHA Jumbos" in declining market areas. FHA Housing Commissioner Dave Stevens made the announcement on Saturday to a packed house at the 2009 REALTORS® Conference & Expo in San Diego. Details on the appearance by Commissioner Stevens and the new FHA change can be found here.

BREAKING NEWS: HUD Announces 120-Day Delay in Enforcement of new RESPA rules

The U.S. Department of Housing and Urban Development (HUD) announced today that while the new regulatory changes to the HUD-1 Settlement Sheet and Good Faith Estimate (GFE) are still effective January 1, 2010, the board overseeing enforcement of these new rules will "exercise restraint in enforcing" them. The full article from HUD.gov is here.

The likely impact is that for the first 4 months of 2010 borrowers could see either the current or the revised GFE and HUD-1 form, depending on whether the lender has implemented the changes.

We will provide more updates as we get them.

Photo Friday: Ocean City, MD

We are introducing a new feature to our blog: Photo Friday! Every Friday we'll feature a picture taken from one of our Settlement Officers in the various Mid-Atlantic regions we cover. This week's photo is of the Boardwalk in Ocean City, MD taken by our Eastern Shore Settlement Officer Devin Holland. Thanks, Devin. Great pic!

UPDATE:

This post was scheduled earlier this week. In ironic fashion, it shows sunny skies and beautiful weather. Below, however, is actual video footage from Monica McNamara yesterday.

Wanted: Superstar Title Processor

Do you know someone who has title experience and is looking for a change? Someone who demands the the most of himself/herself? Someone who wants to work with some of the best real estate agents in the industry?

We are again looking to hire an experienced Settlement Coordinator. The industry calls them "processors," but we know they are so much more. A Settlement Coordinator "quarterbacks" the file, and is only happy when buyers, sellers, agents and loan officers are happy. A Settlement Coordinator understands attention to detail, time commitments, and most of all the art of "over-communication."

If you are interested, or know someone who is, apply here. More questions? Call Meredith Bloom at 856-914-8652 or email info[at]MASettlement[dot]com.

Tax Credit Update: Income Limits

We have received several questions lately surrounding the extension and expansion of the First Time Homebuyer Tax Credit. As I research and answer, I'll also post here.

Q: The buyer is a single taxpayer making $130,000 a year, $10,000 of which is his employer's contribution to the buyer's 401(k). Assuming he qualifies in all other respects and has no other income than mentioned above, does he qualify for the tax credit?

A: Yes. The new income limit is $125,000 for a single taxpayer (increased from $75,000). The definition of "income" for the purposes of this tax credit is Modified Adjusted Gross Income. While the $10,000 in employer contributions is technically income, it is not included in the IRS definition of Modified Adjusted Gross Income and therefore the buyer qualifies with $120,000 in "income."

Tomorrow we'll discuss whether a buyer must sell their current house to be eligible for the $6,500 existing homeowner tax credit. Stay tuned!

Sources: here and here

Note: Please consult with a CPA before making any decisions. These posts are meant to provide the real estate community with a broad understanding of real estate topics and are not to be relied upon as legal or accounting advice.

Happy Veterans Day!

Mid-Atlantic Settlement Services recognizes the dedication and sacrifice made by those who have served in our armed forces. Formerly known as Armistice Day, the state and federal holiday was officially changed to "Veterans Day" in 1954 to honor our military veterans.

For more history on Veterans Day, check the wikipedia.org line here.

THANK YOU to those of you who have served on our behalf, or are currently serving!




Photo Credit: respres on Flickr

EDITOR'S NOTE: The writer (Derek Massey) scheduled this post for a Wednesday release. The Editor (Derek Massey) inadvertently published it today. As President of the company (Derek Massey) hereby apologizes for the Writer's and Editor's lack of communication.

Additional Detail on Existing Homeowner Credit: Contract or Settlement Date?

We have seen a few folks question whether it is the contract date or the settlement date which determines whether an existing homeowner qualifies for the $6,500 tax credit. The National Association of REALTORs (NAR) is indicating that it is indeed the settlement date. Even if your buyer is already under contract, as long as the settlement takes place after President Obama signed the bill (and assuming he qualifies in all other respects), he is eligible for the credit.

From the REALTOR Action Center Blog "Frequently Asked Questions" document we shared earlier:

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

As always, your buyers should seek the advice of a CPA to determine eligibility for any tax credit, but this is helpful information.

It's Official: Tax Credit Extended

Today President Obama signed the Unemployment Insurance Bill, which contains a provision to extend the current $8,000 First Time Homebuyer Tax Credit and expand the reach of the credit by allowing for a $6,500 credit to so-called "step-up" buyers. Details of the story can be found here.

As a real estate agent, how do I explain this to my client or determine whether her transaction qualifies?

Perhaps the best description we've see so far is the NAR Frequently Asked Questions: Homebuyer Tax Credit Changes document. Check it out, become familiar with the hypothetical scenarios, and share with your clients.