Dear Jman, My wife and I are in contract for the purchase of our new home and we will be receving the tax credit. We plan to do some remodeling with that money and since this our fist home we aren’t sure how we should go about it. We want to do things to improve the value of the property but also make us happier to live there.

Many of the first time home buyers as well as repeat home buyers that will be owning new homes in the coming months are more then likely thinking the same as you. The tax credit was implemented for home owners to use the $6500-$8000 tax credit that they are receiving to stimulate the economy. Remodeling your home, furniture and landscaping are just a few of the things that the tax credit money will be going to. I have included an excerpt from an article on homeideas.com that has 10 tips for adding value for your home.  Each year Remodeling Magazine does a Cost vs. Value report  that provides an average return for many home improvements.

10 TIPS FOR ADDING VALUE

1. Good plans equal great results.
Successful remodeling projects require careful planning and a realistic budget.  A solid strategy will ensure that the homeowner and the contractor are on the same page, saving both parties time and money.

2. Quality counts.
Potential homebuyers have more sophisticated tastes than ever. That’s why spending a little extra on good design, quality materials and careful craftsmanship can garner big rewards when it comes time to sell.

3. Insist on coherent design.
A good remodel or addition should complement the original structure. Pay particular attention to roof lines, trim details and window sizes and styles.

4. Meet expectations.
What buyers want varies from area to area and from one price range to the next. Do some comparison shopping to see what your competition will be like should you decide to sell. And talk to a real-estate agent who knows your neighborhood.

5. Consider the neighbors.
The value of nearby houses affects the value of your home. Remodeling or adding on to a house that’s smaller than surrounding homes will yield a greater value than adding on to a house that’s already one of the largest on the street. A general rule of thumb: Don’t overbuild for the neighborhood.

6. Get permission.
Before starting any type of remodel, make sure the design conforms to all local building restrictions. Some neighborhoods also have their own stipulations and design review processes. Double-check that necessary building permits have been acquired before construction begins.

7. Build up to code.
Plumbing, electrical and building codes help ensure safety. Licensed contractors should perform work that meets all codes.

8. Exercise patience.
If you can, wait for the right time to sell. If the current market doesn’t support the value you are looking then be patient and wait for the property to appreciate.

9. Know the market.
Some types of remodeling projects can return more than average and speed up resale.

10. Experience matters.
Substandard work on your remodel is a buyer turnoff

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I am a first time home buyer and am wondering if there is some kind of lemon law that applies to real estate? I know if you buy a car and there’s all kinds of problems that they u can take it back within a certain amount of time or t least make the car dealer fix it. Is there something similar that applies to real estate? I don’t have much savings and would like to skip the inspection to save some money if there is some kind of law to protect me if the house looks to be in good shape.

In New York State there is no such law. We are what’s called a “caveat emptor” state which is Latin for “LET THE BUYER BEWARE”. There is no warranty in NYS for existing property unless purchased from outside insurance type companies and even then you will have to prove that it wasn’t a pre existing condition and sometimes the only way to do that is with your inspection report. There is a warranty in NYS for new homes but it is limited by time. One year is for faulty workmanship and defects in the home, two years for mechanical and seven for the structure. It is of the upmost importance to do as much research as you can about the property prior to purchasing it. There can be contingencies built in the contract that make your offer contingent on a satisfactory inspection. Inspections prices vary depending on inspector, area and size of the house but a good estimate would be 1-2% of your purchase price. The investment is minimal when considering that this may be the biggest purchase of your entire life to date and you may not be able to recover any damages from the seller once you have closed on the house. In NYS a typical seller is required to disclose anything they know about the property or pay a $500 fine to buyer at closing. It is in this disclosure that the seller is suppose to tell a potential buyer anything they may know about the property ,be it good or bad. They are especially suppose to disclose what we call “Latent defects” with the property. These are hidden defects that could not have been discovered by a reasonable person doing a visual inspection of the property. These could be things like foundation issues, water seepage into the basement, flooding or drainage issue in the yard, etc.  Inspectors in NYS are supposed to be licensed in order to inspect a property and have a general knowledge of everything to do with a home. If they do find issues with a home or items that may require further investigation then they may recommend that you have an expert evaluate it further. For example, A plumber, electrician, structural engineer,roofer,landscaper or even a HVAC technician. The experts can tell you what needs to be done to remedy the issue or you can make the decision at that point whether to continue on with the purchase of the home. Either way you know.

In closing, INSPECT,INSPECT,INSPECT. If you do not have much money to spare or savings in case of rainy day then that is exactly why you should have an inspection done. Hundreds of dollars now can save you thousands of dollars later.

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I didn’t qualify for the first time home buyer tax credit that was set to expire this past November 30, 2009 but now I hear that there is a tax credit for repeat buyers. What is the Tax credit and how can I qualify for it?

Right now, We have never seen before opportunity that has never been seen before and may never be seen again. That in conjunction with the lowest interest rates in decades has made it the time to buy. Historically the resurgence of the housing market has stimulated the economy with it. So,As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:

• Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
• Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Here is more information about how the Extended Home Buyer Tax Credit can help you and other prospective home buyers become part of the American dream.

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000.

The maximum allowable credit for current homeowners is $6,500.

How is a Buyer’s Credit Amount Determined?

Each home buyer’s tax credit is determined by tow additional factors:

1. The price of the home.
2. The buyer’s income.

Price

Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income

Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009,  single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I have been thinking about buying my first home and of course I am looking for a good deal. I have been watching shows about buying foreclosures and what a great deal they can be. Is that true for our area? And/or is there anything special I should know about the financing?

Great question, everyone is always looking for a “good deal”. Let’s talk about foreclosures in our area, how they are priced and how to purchase them. According to Realtytrac.com, foreclosure’s increased 81% in 2008 in the nation and NYS wasn’t in the top 10. While we do have some foreclosures there are not as many as prevalent as any of that top states where the foreclosures sit on the market for an extended period of times and which case the bank’s may be willing to accept offers for below market value.

The bank establishes a price from either an appraisal or what’s called a BPO or Brokers Price Opinion. The BPO is an in depth analysis of comparable properties and is usually done by two or three different licensed Realtors and an average is found to come up with a fair market value. The value considers what repairs are necessary to bring it up to habitable conditions.

The Bank’s may be more educated then an average seller about the area, market stability and what the property is worth because of how in depth the appraisals and BPO’s are. If there are too many repairs needed the property may not be able to be purchased with standard bank financing or any financing at all. This would require an all cash purchase which may not be a possibility for first time home buyers or what’s called a “Rehab” loan. A Rehab loan gives the purchaser money to buy the home and a separate loan to do the repairs if the improved property value can support it. The work typically has to be done by licensed and insured contractors and there are inspections done though out the entire process to be sure that everything is done to their requirements.

When you factor in all the time and money necessary to bring the property to what you would call “move in condition” the foreclosure may not be a good deal after all and it may be better just to find a home where the work has already been done. The exception to the rule would be when you can buy the home with cash or sizeable down payment and do the work yourself or hire someone to do it for less than average construction rates. You should always do an inspection before you buy because a lot of times these properties are sitting vacant for long periods of time and may have many latent defects or hidden problems that could cost you thousands of dollars later on down the road.

You should also work with an agent who’s familiar with foreclosures and how to purchase and finance them. A mistake in the process could cost you. Bank’s are typically not very patient and will reject your offer outright if it’s not written perfectly to their requirements.  In closing, keep an open mind and don’t rule out all types of properties because you never know what you might miss out on.

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I am a first time home buyer and of course I have already heard of the First Time Home Buyer Tax Credit that you and just about every one else has written and or talked about. I did however just hear about a new program from SONYMA that is also for first time home buyers. What is it and can I also get it with my Tax Credit for my buying my first home?

The program that you are talking about has just become available on September 1st,2009 and not all lenders are participating. It is offered by SONYMA which stands for the State Of New York Mortgage Agency. SONYMA offers six mortgage programs as well as mortgage credit certificates to assist you with the purchase of a home in New York State. The mortgage credit certificates offer a federal income tax credit. The program is designed to make your home purchase more affordable. Here is some more information about the program

New York State’s Mortgage Credit Certificate (MCC) Program is an alternative way for SONYMA to assist first-time homebuyers. With an MCC, 20% of your annual mortgage interest can be converted into a tax credit and deducted dollar for dollar from your Federal income tax liability.  The remaining 80% of mortgage interest continues to qualify as an itemized tax deduction. The credit can be taken to reduce your tax burden every year for the life of the mortgage loan as long as you continue to live in the home. The feasibility of the MCC and the degree to which it can provide housing assistance is totally dependent upon the extent to which you have a Federal tax liability, which can be offset by the MCC tax credit.

The benefits of an MCC to a first-time homebuyer can be significant. For example, for a mortgage of $200,000 with an interest rate of 5.5%, the mortgage interest paid in the first year is $10,933.  With an MCC, 20% of interest, $2,186, can be converted to a direct tax credit, a savings of $182 per month. Note that the MCC amount will decrease slightly each year as the amount of interest paid decreases.

Federal law prohibits SONYMA from combining MCCs with its own mortgages. However, MCCs can be used with other fixed-rate mortgages that lenders offer, such as: Conventional loans (Fannie Mae/Freddie Mac); FHA-insured loans; VA-guaranteed loans; or Other fixed-rate products. To take advantage of this program, you must file IRS Form 8396 with your Federal tax return for each year.

Mortgagor(s) receiving an MCC can also take advantage of the $8,000 Federal tax credit – which is available for loans closed by November 30, 2009. All SONYMA Mortgage Credit Certificate Program participants must meet certain Household Income and Purchase Price limits. Household Income Limits. Learn about special incentives in Target Areas.

How Do I Apply?

To apply for the Mortgage Credit Certificate program you must: Contact one of the Participating Lenders; and Apply for a Mortgage Credit Certificate at the same time you apply for a mortgage from one of our MCC participating lenders.

If you are approved for an MCC, you can take a dollar-for-dollar tax credit equal to 20% of your annual mortgage interest costs when you file your Federal income tax return.

The remaining 80% in annual mortgage interest costs remains tax deductible.

All SONYMA Mortgage Credit Certificate Program participants are subject to the Federal Recapture Tax.

This information was provided by the SONYMA website which includes a Savings calculator for your mortgage amount and interest rate and also a list of participating lenders.

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I have been hearing about this $8000 tax credit a lot in the news and the paper but I also heard that the New Economic Stimulus Package that passed may have changed it. What are the changes and how do I qualify

First-time buyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of withholding they paid during the year plus anything extra they had to pay when they filed their returns. But there has been a lot of confusion over this part of the package so here are three scenarios:

Scenario 1: Your final tax liability is normally $5,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid $5,000. Since you’ve already paid the government all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $4,000, but you’ve overpaid by $2,000 through your payroll withholding. Normally you would get a $2,000 refund check. In this scenario, you get $10,000, the $8,000 credit plus the $2,000 you overpaid.

Scenario 3: Your final tax liability is $7,000, but you’ve underpaid through your payroll withholding by $1,500. Normally, you would have to write the IRS a $1,500 check. This time, the first $1,500 of the tax credit pays your bill, and you get the remaining $6,500 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy – or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit. If you purchased this year before you’ve done your taxes then you can still amend the return to receive the credit this year. I have enclosed the following graph that was put together by the National Association Of Realtors that compares the old tax credit with the New ones.

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I am thinking of moving up to a bigger house and I estimate that I will make a decent profit when I sell and am wondering how much in taxes will I have to pay?  Is there some kind of exemption because I have been owner occupant for the entire 10 years that I have owned the home?

Selling your home can be a big decision and it is important to weigh the options. I am enclosing information about Capital Gains Tax and what the exemptions are that you may qualify for and also a little questionnaire that you can ask yourself if it’s time to move up yet.  When you sell a stock, you owe taxes on your gain—the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

1. Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.

2. Add adjustments:

• Cost of the purchase—including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.

• Cost of sale—including inspections, attorney’s fee, real estate commission, and money you spent to fix up your home just prior to sale.

• Cost of improvements—including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. The total of this is the adjusted cost basis of your home.

4. Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

A Special Real Estate Exemption for Capital Gains Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

• You have lived in the home as your principal residence for two out of the last five years.

• You have not sold or exchanged another home during the two years preceding the sale.

Also note that as of 2003, you also may qualify for this exemption if you meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.

Does Moving Up Make Sense? Answer these questions to help you decide whether moving up makes sense.

1. How much equity do you have in your home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of paying a mortgage, but if you’ve owned your home for a number of years, you may have significant unrealized gains.

2. Has your income increased enough to cover the extra mortgage costs and the costs of moving?

3. Does your neighborhood still meet your needs? For example, if you’ve had children, the quality of the schools may be more of a concern now than when you first purchased.

4. Can you add on or remodel? If you have a large yard, there might be room to expand your home. If not, your options may be limited. Also, do you want to undertake the headaches of remodeling?

5. How is the home market? If it’s good, you may get top dollar for your home.

6. How are interest rates? A low rate not only helps you buy more home, but also makes it easier to find a buyer.

For all of your real estate answers send AskJMan@JManSells.com

DEAR JMAN, I  am looking to buy my first home and I wondered if you could give me any advice? I know its  a really big purchase and don’t want to make a mistake. 

You are not alone, both first time home buyer and veteran buyers want to make the right decision regardless of where they are purchasing and in what price range. Buying a home is said to be one of the most stressful things you can go through in your lifetime but picking the right Realtor and having everything go smoothly can make it an enjoyable experience and one to remember for a lifetime. I have enclosed two separate reports. The first is 10 Tips for First time home buyer and the second is 10 things to take the trauma out of home buying I hope that you find the first home of your dreams and enjoy it for many years to come..

10 Tips for First-Time Homebuyers

1. Be picky, but don’t be unrealistic. There is no perfect home.

2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your downpayment and your closing costs.

4. Don’t wait to get a loan. Talk to a lender and get prequalified for a mortgage before you start looking.

5. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.

6. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?

7. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best.

8. Don’t let yourself be “house poor”. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.

9. Don’t be naïve. Insist on a home inspection and, if possible, get a warranty from the seller to cover defects within one year.

10. Get help. Consider hiring a REALTOR as a buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. And often, buyer’s reps are paid out of the seller’s commission payment

10 Things to Take the Trauma Out of Homebuying

1. Find a real estate professional who’s simpatico. Homebuying is not only a big financial commitment, but also an emotional one. It’s critical that the practitioner you choose is both skilled and a good fit with your personality.

2. Remember, there’s no “right” time to buy, any more than there’s a right time to sell. If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes don’t usually occur fast enough to make that much difference in price, and a good home won’t stay on the market long.

3. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision.

4. Accept that no house is ever perfect. Focus in on the things that are most important to you and let the minor ones go.

5. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price may lose you the home you love.

6. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself—room size, kitchen—that you forget such issues as amenities, noise level, etc., that have a big impact on what it’s like to live in your new home.

7. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate insurance availability, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.

8. Factor in maintenance and repair costs in your post-homebuying budget. Even if you buy a new home, there will be some costs. Don’t leave yourself short and let your home deteriorate.

9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big commitment, but it also yields big benefits.

10. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually from 1998 to 2002, a home’s most important role is as a comfortable, safe place to live.

For all of your real estate answers send AskJMan@JManSells.com

Dear JMan, I am looking to sell my home and I wanted to do it on my own. I feel like with the market picking up and the above average condition of my property that it should sell without a problem. I just don’t want to accept an offer from a buyer that may not qualify. What should I do to make sure that the buyer is qualified?

The market is definitely picking up with the First time home buyer tax credit increasing buyer activity. However, It remains to be what I like to call a Realtors® market, with the increasing popularity of the internet and the Banking industry changing its guidelines daily it is crucial to hire an expert to market the sale of your home. Gone are the days of old when you could put up a sign and have multiple offers the next day.  I have enclosed a report with reasons to hire a Realtor®. In addition, according to the 2007 Survey of home buyers and sellers done by the National Association of Realtors the typical FSBO(For Sale By Owner) home sold for $187,200 compared to $247,000 for agent-assisted home sales. The number one reason why a seller decides to sell their home on their own is the perceived savings in commission. If after all this you do decide to try it on your own I have included some information on how to make sure the buyer is qualified that is purchasing your home. Many buyers will be willing to buy your home but making sure they are ABLE is of the utmost importance. I would also suggest that you keep showing the home to potential buyers until you have a clear to close from the buyers attorney.

Reasons You Need a REALTOR

1. A real estate transaction is complicated. In most cases, buying or selling a home requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multi-page government-mandated settlement statements. A knowledgeable guide through this complexity can help you avoid delays or costly mistakes.

2. Selling or buying a home is time consuming. Even in a strong market, homes in our area stay on the market for an average of 57 days depending on area and price range,And it usually takes another 60 days or so for the transaction to close after an offer is accepted.

3. Real estate has its own language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with someone who speaks that language.

4. REALTORS have done it before. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. And even if you’ve done it before, laws and regulations change. That’s why having an expert on your side is critical.

5. REALTORS provide objectivity. Since a home often symbolizes family, rest, and security, not just four walls and roof, homeselling or buying is often a very emotional undertaking. And for most people, a home is the biggest purchase they’ll ever make. Having a concerned, but objective, third party helps you keep focused on both the business and emotional issues most important to you.

6. REALTORS are members of the NATIONAL ASSOCIATION OF REALTORS, a trade organization of more than 1 million members nationwide. REALTORS subscribe to a stringent code of ethics that helps guarantee the highest level of service and integrity.

Is Your Buyer Qualified?

Unless the buyer who makes an offer on your home has the resources to qualify for a mortgage, you may not really have a sale. If possible, try to determine a buyer’s financial status before signing the contract

1. Has the buyer been prequalified or preapproved (better) for a mortgage. Such buyers will be in a much better position to obtain a mortgage promptly.

2. Does the buyer have enough money to make a downpayment and cover closing costs? Ideally, a buyer should have 20 percent of the home’s price as a downpayment and between 2 percent and 7 percent of the price to cover closing costs.

3. Is the buyer’s income sufficient to afford your home? Ideally, buyers should spend no more than 28 percent of total income to cover PITI (principal, interest, taxes, and insurance).

4. Does your buyer have good credit? Ask if he or she has reviewed and corrected a credit report.

5. Does the buyer have too much debt? If a buyer owes a great deal on car payments, credit cards, etc., he or she may not qualify for a mortgage.

6. Is the buyer contingent on the sale of a home? If so, Is it priced right and will it sell?

For all of your real estate answers send AskJMan@JManSells.com