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.

Reprinted from REALTOR^® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS^®
Copyright 2005. All rights reserved.
www.REALTOR.org/realtormag

Here is the 6^th of six biggest mistakes homebuyers make according to cnnmoney.com;

Not budgeting for insurance

Don’t underestimate insurance costs and fail to budget for them.

Many homebuyers don’t understand just what is — and what is not — covered. Standard policies pay for theft and wind, fire, lightning, hail and explosion damage. Not covered is flooding, earthquake damage or problems caused by neglect of routine maintenance, according to Jeanne Salvatore, spokeswoman for the Insurance Information Institute, an industry-sponsored educational group.

“The most important thing is before you buy a home, find out what it will cost to insure it,” she said. “Insurance needs to be calculated into the cost of owning a home. Unlike a mortgage, which you can pay off, you’ll be responsible for the insurance costs forever.”

For flood insurance, most buyers use the National Flood Insurance Program. Earthquake coverage may be available through a state authority or some private companies.

Depending on location, flood insurance can run into a lot of money. The cost of $250,000 worth of government flood coverage on the building and $100,000 of its contents can go as high as $5,714 in high-risk, coastal areas.

Here is the 5^th of six biggest mistakes homebuyers make according to cnnmoney.com;

No contingencies

When signing a sales contract, buyers usually have to put up 1% to 3% in “earnest money,” which they don’t get back if they pull out of the deal except under certain conditions spelled out in the contract.

Sellers try to limit the grounds for canceling, and inexperienced buyers may sign contracts that don’t include common exceptions, such as uncovering major problems during the home inspection, failing to obtain financing and failure of the house to appraise.

Failure to obtain financing is common these days because lenders have become very picky; underwriting is very strict.

Even if your mortgage company is still willing to finance your purchase, the house itself may be worth less than you’ve contracted to pay for it, and the lender will pull its approval.

With residential real estate markets still slow, sellers usually accept contingency clauses, but if they resist, it may be better to rethink the deal. Losing a deposit of $2,000 to $6,000 on a $200,000 home hurts.

Below you will see a shorten bullet point breakdown of what the news media and web sites across the country are reporting the program basics:

* First-time home buyers hay be eligible for a tax credit of up to $8,000
* Existing home owners who have been residing in their principal residence for five consecutive years out of the last eight may be eligible for a tax credit of up to $6,500
* The credit is for homes purchased as a primary residence under $800,000
* The credit is for homes purchased between November 6, 2009 and April 30, 2010. All closing must take place no later than June 30, 2010.
* Certain income limits apply

Here are other posts we made with greater detail:
http://www.connesteefallshomes.com/q-a-on-move-uprepeat-home-buyer-tax-credit/

http://www.connesteefallshomes.com/homebuyer-tax-credit-extension-nov-3rd/

We encourage you to take advantage of this limited time opportunity from the Federal Government. For more information we encourage you to see the advice of your tax professional. Want more information about Brevard and Western North Carolina? Give is a call today. Hope to see you soon.

IRS Homebuyer Tax Credit

1. Who is eligible to claim the $6,500 tax credit?
   Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
2. What is the definition of a move-up or repeat home buyer?
   The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. That is, both spouses must qualify as long-time residents, with at least five years of principal residency for each. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
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 $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
4. Are there any income limits for claiming the tax credit?
   Yes. 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) above those limits. 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. 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 the 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.

6. 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 $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. 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 $6,500 by 0.5. The result is $3,250.

   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 $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.

   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.

8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?
   The previous tax credits applied only to first-time home buyers and were for different amounts of money.
9. 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).

   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 repeat 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.

10. 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.

11. 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 $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).

12. 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 after November 6, 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. Be sure to check with a tax advisor in cases where a HUD-1 form is not used at settlement to be sure you have sufficient documentation to attach to IRS Form 5405.

13. 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.
14. I am not a U.S. citizen. Can I claim the tax credit?
    Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
15. 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 $6,500 in income taxes and who receives an $6,500 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 $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.

16. 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 the 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.

17. HUD allows “monetization” of the tax credit. What does that mean?
    It means that HUD will allow 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 the guidelines announced by HUD, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans. 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.

18. 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.

19. 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.
20. 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.
21. 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.

Were you on the fence deciding when to buy your retirement home in the Brevard NC Mountains?

NOW IS THE TIME!

With the Home Buyer Tax Credit extension’s new terms, it opens the door to current homeowners wanting to relocate.

• 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.

According to the National Association of REALTOR S here are 7 questions and answers about how the Extended Home Buyer Tax Credit can help prospective home buyers wanting to relocate.

Who Qualifies for the Extended Credit?

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.

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 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:

The price of the home & 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.

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.

The professionals at Connestee Falls Realty are ready to assist you in your search to find your home in the Brevard NC mountains!  Give us a call today!

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Q: What is “earnest money?”

A: It is money you give to the seller (or the seller’s agent) to show your good faith when making an offer to purchase the seller’s property.

Q: Do I have to pay an earnest money deposit to have a valid contract?

A: Although no law requires it, sellers typically do require it. If you agree to pay earnest money but do not make the required payment or your earnest money check “bounces,” you will probably be considered in breach of the contract.

Q: How much earnest money should I pay?

A: The amount is negotiated between you and the seller. It is typically a small percentage of the purchase price and can vary depending upon local market conditions, the price of the property, the type of property (e.g. vacant land, existing housing, or new construction), whether cash advances to a builder or seller are involved, and other factors.

Q: Who can hold earnest money?

A: Any person (or entity) agreeable to you and the seller, but usually a licensed real estate broker. As a buyer, be aware that if you allow earnest money to be held and deposited by a seller or by a builder or developer for use in construction, you risk that they will not be able to return it to you in the event the transaction does not close (due to the seller’s death, divorce, bankruptcy, judgment liens, receivership, fraud, tax liens, title problems, etc.). Consequently, most buyers prefer to have real estate agents or attorneys hold the earnest money deposit. Since they are licensed by the state and required to deposit the money in a trust or escrow account, this reduces the risk that the monies will be improperly used.

According to the NC Real Estate Commission, now suppose that the seller rejects the buyer’s offer but makes a written, signed counteroffer. To accept the seller’s counteroffer, the buyer must do two things: (1) sign the counteroffer, and (2) communicate acceptance back to the seller or to the seller’s agent.

A signature, without communication, does not create a contract. Conversely, communication of acceptance, without a signature, does not create a contract.

In a “nutshell”

A contract for the sale of land is enforceable only if (1) it is in writing and signed; and (2) an offer has been made, is supported by consideration and is properly accepted. Acceptance requires not only the written signatures of the parties, but also communication of acceptance from the party accepting the last offer/counteroffer to the party (or party’s agent) who made it.