Senators OK homebuyer tax credit extension Set to expire at end of November, plan will remain until end of April

Senators OK homebuyer tax credit extension

Set to expire at end of November, plan will remain until end of April

The Associated Press updated 6:56 p.m. ET, Wed., Oct . 28, 2009

WASHINGTON - Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.

The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November.

Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.

The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, said a congressional aide, who spoke on condition of anonymity because he was not authorized to publicly discuss the deal.

Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.

Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.

Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.

Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.

Majority Democrats have refused to add the amendments.

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Senate Close to Deal Replacing Homebuyer Tax Credit

By Dawn Kopecki and Ryan Donmoyer

Oct. 27 (Bloomberg) -- U.S. Senate leaders moved closer to an agreement replacing an expiring $8,000 tax credit for first- time homebuyers with a smaller one that would expand access to so-called step-up purchasers, two people familiar with the matter said.

The deal would reduce the size of the tax credit to 10 percent of the sale’s price, capped at $7,290, the people said. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.

The new agreement, which is still being negotiated and may change, would grant the credit to borrowers who have lived in their current home for at least five years. Lawmakers want to keep home sales from slipping as the economy struggles to recover from the worst drop in home prices since the Great Depression.

The demand for new homes and condominiums may increase by “more than two times because you’re allowing step-up buyers into the equation,” said Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington. “ You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out.”

The income eligibility for first-time homebuyers would remain the same at $75,000 for individuals and $150,000 for couples. The income criteria for step-up buyers would be $125,000 for individuals and $250,000 for couples.

The credit would be limited to homes costing $800,000 or less. There is currently no price cap on home purchases.

Unemployment-Benefits Bill

Lawmakers are trying to attach the legislation, which is also being considered by leaders in the House, to a bill extending unemployment benefits under debate on the Senate floor, said Richard Durbin of Illinois, the Senate’s No. 2 Democrat.

Senator Bill Nelson, a Florida Democrat, told reporters yesterday of the tax credit that “we should be able to extend that later this week.” Nelson was traveling with President Barack Obama on Air Force One to a speech in Jacksonville, Florida.

Lawmakers are also considering pairing the new homebuyer credit with a broader tax benefit for businesses with net operating losses, and passing that as a separate bill. The tax break, a priority for homebuilders, would allow companies to apply losses incurred in 2008 and 2009 to amend up to five years worth of earlier tax returns to get a refund of taxes paid in years when they were profitable.

That provision, along with the step-up, would be “extremely positive for the homebuilders,” Parmentier said.

A version of the benefit was included in February’s economic stimulus bill, though it was limited to companies with receipts under $15 million. Business groups, including the Washington-based National Association of Manufacturers and National Association of Home Builders, lobbied unsuccessfully to have the benefit expanded to larger companies.

To contact the reporters on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.com; To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net.

Tax Credit Extension Seems Likely

It seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but the devil is in the details.

Florida Democrat Sen. Bill Nelson told reporters traveling to Florida with President Obama on Monday that he thought that the extension would be approved, but both senators and representatives are among those who think that there should be some fiscal offset for the cost of the extension. Spending any more money on the stimulus effort also could stir up a hornets' nest in some circles.

The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31, then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat.


Source: Associated Press, Andrew Taylor (10/26/2009) and The Wall Street Journal, John D. McKinnon (10/27/2009)

What to do when you have a problem setting the list price of a property?

Do your homework, provide not just avail/sold comps, cover the expired/withdrawn comps too. Call them MARKET REJECTS with clients; explain these are properties rejected by the MARKET.

Next get a US $100 bill (not a $20 or $50) out of your wallet, wave it in front of your client, and show it as beautiful and wonderful. Explain it is REAL, not counterfeit and the questions to follow are no gimmick or trick.

1. Ask the client, if you gave them the $100 would they take it?

They all say YES, and they reach for it.

2. As you take it back, ask, them if it were for sale for $50, would they consider buying it?

50% will say NO. Explain its no trick; ask them again.

Now they say sure! Now explain, the problem is (and point at whoever is near, if no one is around, point at the air), so will she and he, and her, and… they may even be willing to pay $55, $70, $85, even $96.

3. As they show understanding ask, WHY?

They will all give some variation (listen close for insight) it all comes down to VALUE.

4. As you agree with them, ask, would you pay $200, or $125, or just $105 for this $100 bill?

100% they say NO WAY.

5. Again, as you agree with them ask, WHY NOT (with extreme sarcasm)?

Again it comes down to VALUE. They will NOT pay more than $100 because it is NOT worth more than $100, it is important that you repeat that back to them.

“If I understand you correctly, you would pay $100 for the $100 bill, but not more than $100 because of value”? WAIT FOR A REPLY, STOP TALKING, JUST HOLD THAT $100 BILL IN FRONT OF THEM!!!

Now explain this is because that the market, not US (bring them into the situation) set the price of a $100 bill at $100. It sounds stupid, but everyone can relate to the value of a $100 bill (that is why you should always carry on with you at all times).

Now explain, people will pay less for a product because they perceive it as a bargain but, no one will pay more for a product because then the perception is the consumer would be OVER-paying. In other words, paying more than the product is worth.

Now, let’s use Real Estate, and say, your property is $100,000.

1. Ask, if the MARKET, not me or you, said the value of your house is $100,000 would you pay $50,000?

They say SURE.

2. Now ask WHY?

They will time jump straight to VALUE. If not, express their words into one word, “would you agree it comes down to VALUE”?

3. Now ask, if the MARKET, again not me or you, said the value of a given house was $100,000 would you pay $150,000?

100% say NO WAY !

4. Now ask, but what if it had gold plated faucets and ceramic tile and stainless appliances, etc?

Their answer will still be, it is only worth $100,000

NOW YOU HAVE THEM. In 3 to 5 minutes of role play they now understand the concept of value vs. pricing.

LAST QUESTION (it is critical this is asked no doubt in your voice)…

“So tell me, now that you understand the way the MARKET sets values, not you and not me, would you want to price your property at or above the market price”?

One of two things will happen, you will get the pricing that will work or you agree to go separate ways. I no longer have conflicts with sellers (or buyers, I use a variation to explain how lowball offers are a mistake). AND I am prepared to walk away from a potential seller or buyer. It is just not worth my time to try and make potential clients see the “light.” They will always be fighting you every step of the way and that I’ve found is just too draining.

BTW, if you have a client talking about what they paid for the home or what the owner paid, you can add the following when talking about the $100 bill:

Ask them, does it matter what I paid for this $100 bill? If you can get it for $50, would you care that I paid $25 for it? What if I paid $150 for it, would you care? NO… You don’t care about my loss; the MARKET set the price. What I make or lose has ZERO to do with what the MARKET will pay for any product.

Banks Making Short Sales Tougher

Daily Real Estate News

October 9, 2009

Banks Making Short Sales Tougher

Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

"It drives me up a wall," says Robert G. Hertzog of Summit Home Consultants in Phoenix. "[The bank is] holding my client hostage."

Source: BusinessWeek, Christopher Palmeri (10/09/2009)