So Far So Good...tax shelters on your home

Being a home owner, your actual shelter, IS YOUR BEST TAX SHELTER. As soon as you buy your home your tax-cutting opportunities start and continue until you sell it.

Your deductions include all or part of your mortgage interests, the points you paid to get the loan, interest on certain home equity loans, and your annual property tax payments. These write-offs are helpful in reducing your tax bill each filing season.

Another great thing is there is the profit on your home’s sale. So far the IRS can’t touch that money!

According to Mark Luscome, principal federal tax analyst at CCH in Riverwoods, Ill., who is a provider of tax information and services says, "The biggest thing in real estate that would apply to most people is the primary residence sale exclusion."

This tax code provision gives up to $250,000 in sale profit for a single taxpayer, twice that for a married couple filing a joint return, is not taxed. "If you sell before your gain gets to that point, you can avoid ever having to pay tax on the residence," says Luscombe.

The beauty of this home-related tax shelter is that it applies to every principal residence you ever own as long as you meet the IRS rules. The key requirement is that you live in the home two of the five years before you sell.

According to Bod D. Scharin, senior tax analyst from the Tax & Accounting business of Thomson Reuters in New York City, "There are instances where people will buy a fixer-upper and live there for two years while fixing it up and then sell it at a profit. And though a lot of that profit can be attributable to their sweat equity, they still qualify for home sale exclusion,"

8 home improvements for fall

Here are 8 home improvement from expert Paul F. Ryan, host of DIY Network’s Weekend Handyman, for his checklist of cost-efficient home fixes to make before the cold weather hits.

1. Check the heat. No matter what kind of system your home uses (furnace, boiler, etc.), have it inspected annually by a professional so you don’t encounter problems later in the season when you need it most.

2. Reverse your fans. Ceiling fans blow air downward in the summer to help keep things cool. For the opposite effect, Ryan suggests reversing the fan so the current blows up toward the ceiling. “It circulates air and heating much better,” he says.

3. Check for drafts. “One of the most common places people lose warm air is through their outlets and switch plates,” Ryan says. “There are little gaskets you can buy for almost nothing that go behind the plate to seal air from coming in.”

4. Check the roof. “Most problems with a roof are going to show up in the first few years after a roof is installed,” says Ryan, so it’s especially important to have the roof checked if you’ve just moved in or if you’ve endured a stormy summer. And if you’re worried about cost, don’t be. “Typically you can get a roofing company to come out and do roof inspections for free.”

5. Inspect the fireplace. Cleanings and inspections of your fireplace and chimney should be done annually to help ensure safety and efficiency, but if you’re burning a softer wood, such as pine or cedar, have your fireplace inspected twice a year.

6. Drain spigots. Remember to put away all outdoor garden hoses. Also, shut off spigot valves from inside to drain any remaining water and prevent freezing.

7. Seal windows and doors. Cold air currents strain your heating system and cost you money. Try Ryan’s trick for finding drafty doors and windows: Use a stick of incense and walk around to see where the smoke moves—indicating that air is flowing indoors. According to Ryan, “That will tell you which windows and doors you need to seal instead of hiring someone.”

8. Clean out the gutters. Now is the time to tackle the gutters. But Ryan advises to “just make sure you’re comfortable on a ladder. It’s one of the places that people really get injured.” If heights aren’t your thing, consider calling a professional.
Need another incentive to get proactive before winter? Energy-efficient windows, doors, insulation, heating systems and roofing can qualify for a tax credit if installed before December 31.

Extension of Tax Credit still up in the...

A report from the NAR disclosed that the Federal Tax Report Focus on Extending Tax Credit Intensifies While no official legislative action took place on the tax credit during the preceding week, the buzz generated increased measurably. REALTORS® have generated almost 500,000 letters to congressional offices via the REALTOR® Action Center.

NAR's Call for Action to NAR members has achieved a higher response rate than any other previous Call for Action, underscoring the importance of the credit to REALTORS® and consumers alike. Several House members have introduced bills extending the credit in direct response to the communications from REALTORS®.

Senate Majority Leader Harry Reid (D-NV) continues to express his desire to move the extension at the first opportunity. As yet, however, there is not a clear procedural path to enactment, nor is there any agreement on how (or whether) the provision will be "paid for." As yet, no revenue source for extending the credit has been identified. The "cost" is about $1 Billion for each month of extension.

Century 21 honored with the OMMA Award...

Century 21 Real Estate Honored for Outstanding Achievement in Search Engine Marketing and Innovative TechnologyPrint Article RISMEDIA, October 6, 2009

Century 21 Real Estate LLC, the franchisor of one of the world's largest residential real estate sales organizations, announces its website, century21.com, was honored with an Online Advertising Creativity Award from the OMMA Awards, and a WebAward in real estate excellence from the Web Marketing Association.

"These awards underscore the effectiveness of our interactive marketing effort and our commitment to providing an enhanced online experience for our consumer," said Bev Thorne, senior vice president of marketing, Century 21 Real Estate LLC. "Our digital strategy continues to drive results and deliver value to Century 21 System members. Since last year, we have driven 65 percent more leads to our franchisees, while decreasing our cost per lead by 50 percent."

The OMMA Award, which reviews submissions across all industries, honored Century 21 Real Estate for its search engine marketing work with MediaCom Search, a division of GroupM Search. Century 21 Real Estate was honored for having the best search marketing for paid search. Century 21 and MediaCom Search also received a Stevie Award this for this same campaign in July.

Century 21 Real Estate's receipt of a 2009 WebAward recognizes innovative technology offerings and an enhanced customer experience via century21.com. For more information, visit http://www.century21.com/. RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

FHA May Further Delay Implementation of New Condominium Rules

FHA May Further Delay Implementation of New Condominium Rules

The new condominium approval process under Mortgagee Letter 2009-19 was to be effective for all case numbers assigned on or after October 1, 2009. While the new effective date is for case numbers assigned on or after November 2, 2009, NAR understands that the new effective date may be delayed even further.

The site condo and manufactured housing condo project changes that have already taken effect are not affected by this delay. However, all other rules of the condominium program remain in effect. For example, lenders are permitted to offer spot loans until the new condominium rules go into effect. On July 31, 2009, NAR President Charles McMillan sent a letter to FHA Commissioner David Stevens recommending enhancements to the new condominium rule.

Mr. McMillan also discussed NAR's recommendations at a meeting with the Commissioner on September 8, 2009. NAR is calling for:
1) a reduction in the owner-occupancy requirement,
2) eliminating or increasing the FHA concentration limit,
3) reducing the pre-sale requirement, and
4) clarification of the reserve study requirement.

NAR has recently contacted FHA asking the agency to consider allowing spot loans under the new condominium rules when they go into effect.

NAR Letter to FHA on New Condominium Rule EnhancementsMortgagee Letter 2009-19: Condominium Approval Process – Single Family Housing
Jerome Nagy 202-383-1233, Megan Booth 202-383-1222

8000 tax credit to be extended?

Rangel, Pelosi Comment about Tax Credit Extension

At a press conference on October 8, House Speaker Pelosi (D-CA) responded favorably when asked about the likelihood of extending the first-time homebuyer tax credit. When asked about the possibility of further housing legislation, she responded "Yes, there is under consideration whether we extend the first time homeowners credit. And the question is, would that be just first time homeowners or would you open it up to other purchasers of homes?" She shed no further light on whether the credit would be expanded, but did note that the cost of an expansion would be the major consideration in the decision process. When asked for comment, Bloomberg Wire Services reports that Chairman Rangel (D-NY) said, "There's no question that I think it should be extended; for how long, we should discuss." As yet, no formal action has been announced.

Top 5 Cities Where Americans Pay Most to Live

Here are the Top 5 Cities Where Americans Pay Most to Live
1. San Jose, Calif.San Jose-Sunnyvale-Santa Clara, Calif. Metropolitan Statistical AreaMedian Monthly Housing Costs: $1,828

2. Bridgeport, Conn.BridgeportStamford-Norwalk, Ct. Metropolitan Statistical AreaMedian Monthly Housing Costs: $1,793

3. Oxnard, Calif.Oxnard-Thousand Oaks-Ventura, Calf. Metropolitan Statistical AreaMedian Monthly Housing Costs: $1,780

4. Washington, D.C.Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V. Metropolitan Statistical AreaMedian Monthly Housing Costs: $1,706

5. San Francisco, Calif.San Francisco-Oakland-Fremont, Calif. Metropolitan Statistical AreaMedian Monthly Housing Costs: $1,660

U.S. Mortgage Backer May Need Bailout

Friday, October 9, 2009 In an article by David Streitfield and Louise Story, Washington policy makers are worrying that another government mortgage giant could be the next housing domino. Problems at the Federal Housing Administration, which guarantees mortgages with low down payments, are becoming so acute that some experts warn the agency might need a federal bailout.

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Running questions about the F.H.A.’s future — underscored by interviews with policy makers, analysts and home buyers — came to the fore on Thursday on Capitol Hill. In testimony before a House subcommittee, the F.H.A. commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was managing its risks.

But he acknowledged that some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances.
“Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, F.H.A. will not need to ask Congress and the American taxpayer for extraordinary assistance — we will not need a bailout,” Mr. Stevens said in his testimony.
But to its critics, the F.H.A. looks like another Fannie Mae. The hearings on Thursday came on the same day that the federal agency charged with overseeing Fannie Mae and Freddie Mac provided a somber assessment of those giants’ health. In the year since the government stepped in to rescue them, the companies have taken $96 billion from the Treasury, and may need more.
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Since the bottom fell out of the mortgage market, the F.H.A. has assumed a crucial role in the nation’s housing market. Created in 1934 to help lower-income and first-time buyers purchase homes, the agency now insures roughly 5.4 million single-family home mortgages, with a combined value of $675 billion.

In addition, these loans are bundled into mortgage-backed securities and guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible for paying investors who own Ginnie Mae bonds when F.H.A.-backed mortgages hit trouble.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” Edward Pinto, a former Fannie Mae executive, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, went further than most housing analysts and predicted that F.H.A. losses would more than wipe out the agency’s $30 billion of cash reserves.
The issue has polarized Congress. Republicans, who led efforts to rein in Fannie Mae and Freddie Mac before those companies ran into trouble, are now seeking to bridle the F.H.A. Many Democrats insist the F.H.A. is playing a vital role in the housing market, which is only just starting to stabilize.

“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”

That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.
She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.

“The government gave me another chance,” she said.
The government is giving as many people as it possibly can the chance to buy a house or, if they are in financial difficulty, refinance it. The F.H.A. is insuring about 6,000 loans a day, four times the amount in 2006. Its portfolio is growing so fast that even F.H.A. backers express amazement.

For decades it was an article of faith that helping people of limited means like Ms. Shimon get a house was good for the new owner, good for the neighborhood and good for American capitalism. Then came the housing bust, which demonstrated that when lenders allowed people to buy houses they ultimately could not afford, it hurt the parties — while putting the economy itself in a tailspin.

In the aftermath of the crash, there is wide divergence on how easy, or how hard, it should be to become a homeowner. Skittish lenders are asking for 20 percent down, which few prospective borrowers have to spare. As a result, private lending has dwindled. The government has stepped into the breach, facilitating loans with down payments as low as 3.5 percent and offering other incentives to stabilize the market. Real estate agents in some hard-hit areas say every single one of their clients is using the F.H.A.

“They’re counting their pennies, scraping up that 3.5 percent,” Bonni Malone of Prudential Americana in Las Vegas said. “Mostly they’re buying foreclosed homes from banks, although I had one client who bought from a guy that was dying. It’s turning around the market.”
While the government’s actions have helped avert full-scale economic disaster, there is growing concern that it might have doled out its favors with too generous a hand.

Many of the loans the F.H.A. insured in 2007 and last year are now turning delinquent, agency officials acknowledge. The loans made in those two years are performing “far worse” than newer loans, dragging down the whole portfolio, Mr. Stevens of the F.H.A. said in an interview.
The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans to such borrowers as Ms. Shimon — the current rate is over a billion dollars a day — 7.77 percent of the portfolio is in default, up from 5.6 percent a year ago. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.
“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

The troubled loans are nevertheless weighing on the agency’s capital reserve fund, which has fallen to below its Congressionally mandated minimum of 2 percent, from over 6 percent two years ago.

The optimism expressed by Mr. Stevens, the F.H.A. commissioner, places him at odds not only with some outside experts but with Kenneth Donohue, the inspector general of the Housing and Urban Development Department, who is also F.H.A.’s watchdog. Mr. Donohue said the drop in reserves was “a flashing red light” that the agency was not taking seriously enough.
“It might be we’ll get ourselves out of this and that everything will be fine, but I don’t paint that rosy a picture,” Mr. Donohue said. “They’re banking on the fact that the economy will continue to improve, that the housing market will begin to sustain itself.”

He noted that if private lenders had raised their down payment requirements in the last two years, it raised the question, “what does the F.H.A. think it is doing by asking only 3.5 percent?”
Any more than that and Ms. Shimon, 45, would still be a renter. As it was, she cashed in her retirement savings account to come up with the necessary funds. She did not have enough to spare for closing costs, so her mortgage broker arranged a deal where the charges were wrapped into the loan at the cost of a higher interest rate. She cried when the deal was done.
The house was empty and trashed. Slowly, she is trying to bring it back to life. She spent the first few weeks picking up garbage in the backyard.

Is Ms. Shimon a good bet? Even she has no easy answer. Her mortgage payment, $1,100, is half of what she takes home every month. It is not easy to make ends meet. Teachers can get laid off like everyone else.

“The government,” she said, “is doing what it needed to do — taking a risk on people.”
Chaz Fullenkamp, an automotive technician in Columbus, Ohio, got an F.H.A. loan even though he was living on the financial edge. “If I got unemployed, I’d be wiped out in a month or two,” he says. Thanks to the F.H.A., however, he is better off than he used to be.
Mr. Fullenkamp used F.H.A. insurance to buy a house this spring for $179,000. The eager seller paid the closing costs and also gave Mr. Fullenkamp $2,500 in cash. He immediately applied for the $8,000 tax rebate. Even taking his down payment into account, he came out ahead.
“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”

As the number of loans has soared, random quality control checks have decreased sharply, F.H.A. staff members say. Mr. Donohue, the inspector general, cited numerous examples of organized fraud in testimony to Congress earlier this year.
“They need to stop taking bad loans in the door,” he said in an interview. “They’re taking on all this volume, they have to have very active underwriting standards.”
Jack Healy contributed reporting from New York.

HOMES ARE SELLING AGAIN!!!

What the Housing Rebound Means for You
By Amanda Gengler, Money magazine writer
Oct 6th, 2009

Homes are selling again, but the market today is divided by price point. Your best strategy depends on where your home sits on that spectrum.
(Money Magazine) -- Home sales are rising. Builders are buying lots. And prices are no longer in free fall. After so much pain, there are signs of life in the housing market.

But the "recovery" is far from universal. In many cities cheaper homes are selling fast -- but mid-range properties are still lingering, and high-end homes are gathering dust. "The luxury market still looks ugly," says economist Joshua Shapiro at economics consultancy MFR. If you're selling or buying, your strategies should depend on the value of the home you want or own.

The bottom tier (hot)
The lowdown: A big chunk of the 1.9 million post-boom foreclosures have been among the least expensive 35% of homes. Bargain prices on these foreclosures and a new tax credit of up to $8,000 for first-time buyers have lured investors and would-be homeowners back to the market, even in hard-hit areas, says Pat Lashinsky, CEO of online brokerage ZipRealty.
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Sales of homes between $100,000 and $250,000 are up 9% from a year ago. Meanwhile, many banks halted foreclosures earlier this year while waiting for details on the Obama administration's foreclosure-prevention plan. Greater demand combined with less supply is providing a strong spark to the market. "Buyers in most areas are now going up against multiple offers," says Lashinsky.

Buyers: See homes the first day they're listed, and if there's one you want, submit an offer immediately, says Phoenix realtor Susan Ramsey. Don't expect a deep discount; prices for lower-end homes are stabilizing. Put down 20% or more, if you can, to compete with cash-rich investors. Offer not accepted? Check in with the seller's agent a few more times; many deals fall through.

If you aren't under pressure to move, keep in mind that the supply crunch is probably temporary. The foreclosure rate is expected to stay at record highs for the rest of the year, and as prices stabilize, more sellers will jump back into the market.
Sellers: Forget trying to compete with foreclosures on price. Some buyers will pay more for a home in move-in condition, so spruce yours up and sell that fact hard in your marketing materials.

Many of the other listings are likely to be short sales in which the bank agrees to accept a price below what the owners owe on their mortgage. Since short sales can take months, offering a quick, flexible closing date will give you another advantage -- and attract first-time buyers aiming to take advantage of the tax credit before it expires at the end of November.

The middle tier (cool)
The lowdown: Demand is soft. That's because the likely buyers are trying to trade up -- difficult for people who bought in the past five years, because they have so little equity. In fact, about a third of all homeowners with a mortgage owe more than the home is worth, according to First American CoreLogic.

Buyers: Unload your current home first, so you know what you can afford to spend on a new place. When you find a home you like, offer 10% less than the asking price -- a realistic discount for a lukewarm market, says realtor Ramsey.

Sellers: If you have to move soon, it's all about standing out from the pack. If your home is sitting on the market, go for one big price cut instead of slowly ratcheting down. A bold move will attract attention and prevent the listing from going stale. Offer to cover closing costs, and since many buyers will be short on cash after the purchase, throw in some necessary improvements, such as new carpeting, blinds, or painting.

If your home is in the half-million-dollar range, try to set the price at a level that doesn't require a jumbo loan, normally $417,000 or less (up to $729,750 in pricey areas). The difference between a $400,000 conforming loan and a $420,000 jumbo loan is several hundred dollars a month. Finally, if you can hang in there, know that prices will likely start to recover within the next 12 to 18 months, says economist Shapiro.

The top tier (cold)
The lowdown: The recession and the credit crunch have almost shut down the top 10% of the market, says Joel Naroff, president of Naroff Economic Advisors. Fewer people can afford a luxury property, and since banks are hesitant to underwrite supersize loans, it's tough to finance them.

Moreover, foreclosures are rarer at this price level, and homeowners, unlike banks, are reluctant to slash their price. Given all that, the prices on high-end homes will probably fall another 10% until the market hits bottom, says Mark Zandi, chief economist at Moody's Economy.com.
Buyers: Get pre-approval before you shop: Jumbo mortgages are tougher to qualify for, require larger down payments (as much as 30% to 40%), and cost nearly a percentage point more than smaller loans. And ask for freebies: While sellers often balk at low-ball offers, they should be willing to negotiate, including paying closing costs and other extras. "You can set the terms," says ZipRealty's Lashinsky. If the seller refuses, move on.

Sellers: You'll need to seriously undercut the competition. (Your agent can provide comparable sales figures for the past three months.) You may want to finance the deal yourself. And motivate buyer's agents with a larger cut of the deal -- a total of 4%, says Sacramento realtor Larry Henderson. It may be painful, but the price of your home is likely to fall further if you wait -- and recovery for your market is a ways off.

One Out of Three loans denied

Report from Federal Reserve reveals 1 in 3 loan applications denied in 2008; Lenders raised standards

According to a recent article written by Alan Ziebel, AP Real Estate Writer, on Wednesday September 30, 2009, 4:52pm EDT, Ziebel wrote that one out of three borrowers who applied for a mortgage last years was denied. This was attributed to lenders keeping their standards tight during the mortgage crisis.

Overall the Federal Reserve said the denial rate for all home was about 32 percent in 2008 and about the same in 2007 but up 29% from 2006.

All loans backed by the Federal Housing Administration soared to 21 percent of all loans made last year from less than 5% in both 2005 and 2006.

Ziebel stated that for black borrowers, more than half of all loans were FHA-insured, more than tripled a year earlier. For Hispanics, that number shot up to 45 percent, more than four times as high as in 2007. That was troubling news for consumer advocates.

John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington said, “I’m hard-pressed to believe that many of those borrowers couldn’t have been served by the private sector…it implies that the industry has shut down in service this population.”

High-priced loans with rates at least 3 percentage points above the rate for prime loans, shrunk to nearly 12 percent of the market form a high of 29 percent in 2006. This figure is believed to reflect unusually low interest rates during the recession, the report said, and understates the disappearance from the market of high-priced subprime loans to make borrowers with poor credit.

According the mortgage industry, lenders say they are not discriminating by race, and are making adjustments based on borrowers’ risk profile - - such as their credit score and the size of their down payments.

Jay Brinkmann, chief economist of the Mortgage Bankers Association says, “You still have a certain degree of risk-based pricing in the market.”

Lenders dramatically scaled back on the amount of so-called “piggyback” mortgages, in which borrowers used second mortgages to avoid making a 20% down payment. Those loans have virtually disappeared from the market: Only 98,000 were made last year, down from 1.3 million annually in 2006.

The data, collected from nearly 8,4000 lenders, is required under the Home Mortgage Disclosure Act of 1975,