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Dear GHNA Residents, I welcome your thoughts and ideas about what you would like to see on this, your real estate page. I’ll be giving updates on the market, like you see here, but I can also do a question and answer column, or just about anything that pertains to Real estate and Glenwood Hills. Greg Lobberegt Also, up to four (4) Tram passes are available from me every day. Call well in advance to
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By now, I hope you have heard that the Homebuyer Tax Credit was extended and expanded. Here are the particulars: - $8,000 to first time homebuyers (haven’t owned for 3 years). - $6,500 to homebuyers who aren’t first-timers. Must have owned last or curret home for a minimum of 5 years. - Must buy a primary residence. - Applies to homes up to $800,000. - Must sign contract to buy home by April 30th, 2010. - Must close by June 30th, 2010. - Must stay in the home for 3+ years. - Income limits are $125,000 for a single or $225,000 for a couple. Credits are phased out over these limits. This is the only information that I have at this point.
Tax Credit Confusion
Finding correct plan can reap savings for homebuyers
If you bought a home in 2009, you could be eligible for a tax credit. Figuring out which one can be confusing.
There’s one credit for first-time homebuyers and another that primarily benefits homebuyers who owned a home before. But don’t mix it up with the first-time homebuyer credit in 2008, which actually was a long-term loan.
There are maximum income levels and maximum sales prices. And vacation homes or rental property don’t qualify.
If you want to spend two hours reading the instructions and translating them and finding out whether you qualify, yes, it’s relatively simple.
Some questions and answers about the homebuyers tax credit.
Q. What’s the purpose of the credit?
A. Congress passed the tax credits in an effort to boost the struggling housing industry and fight recession. Indications are that it’s had an impact. The National Association of Realtors reported that November sales of existing homes were up 44 percent from a year earlier. Although new home sales dropped in November, figures from the Commerce Department show that they’re up 8 percent from the low in January 2009.
Q. How many people are claiming the credit?
A. In all, 4.4 million households are expected to claim the tax credit before it expires.
Q. How many versions are there?
A. There are actually three.
The first credit, for first0time homebuyers, was really a long-term, interest-free loan that has to be paid back over 15 years. The maximum credit was $7,500 for a principal residence purchased between April 9, 2008, and June 30, 2009.
The second iteration made the first-time homebuyers credit a true credit (it doesn’t have to be paid back) and raised the amount to a maximum $8,000. It applied to homes purchased between January 1, 2009, and April 30, 2010.
The third change extended the eligibility dates to homes purchased through April 30,2010. It also added a credit for long-time homeowners who purchased a new residence between November 7, 2009, and April 30, 2010, but at a reduced value- up to $6,500.
Q. Do I automatically qualify if I purchased a home during those periods?
A. No. To qualify, the house has to be used as a primary residence. If purchased after November 6, 2009, it cannot have cost more than $800,000. If you’re a long- time homeowner, you had to have lived in the same house consecutively for five out of the last eight years, though you need not have lived in or owned that house at the time you buy your new home.
For homes purchased after November 6, 2009, the credit also begins phasing out for individuals with modified adjusted gross incomes above $125,000, and for married couples filing jointly with incomes above $225,000.
Q. How does the Internal Revenue Service define a principal residence?
A. Your main home is one you live in most of the time. It can be a house, houseboat, mobile home, cooperative apartment, or condominium.
Q. What if I’m living overseas and I buy a home there?
A. The home doesn’t qualify unless it’s in the
Q. How do I claim the credit?
A. There’s a form, 5405, to fill out. You’ll also have to submit a copy of your settlement statement, usually Form HUD-1, with the names and signatures of all parties, the property address, the sales price and date of purchase.
To avoid refund delays, the IRS recommends that long-time homeowners who purchase a new home also provide documents to show they meet the requirement for consecutive years lived in their old house. These can include mortgage statements, or property tax or homeowner’s insurance records.
Q. Do I have to wait until I file my 2010 taxes to claim the credit for a home purchased before the deadline in 2010?
A. No. You can choose to claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit.
Q. I purchased my home in 2008 and filed for a credit on my tax returns. Do I still have to pay it back?
A. Yes. When Congress did away with the repayment requirement, it did not so retroactively.
Q. What if I purchase the property for business?
A. You’re not eligible. The house must be used as a primary residence to qualify.
Q. What if I want to keep my original house and use it as a rental property?
A. If you qualify for the credit as a long-time homeowner, nothing in the law requires you to sell the original house. However, you must make the new one your primary residence.
Q. What if I decide to sell the house I got the credit for or convert it to a rental property?
A. You will have to pay back the credit if you don’t keep the purchased house as your permanent residence for three years.
From the
Mortgage lenders pursue homeowners even after foreclosure
As terrible as it is to lose your house to foreclosure, at least it's a relief to put your biggest financial headache behind you, right?
Wrong.
Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.
It can even happen to people who got their bank to approve them selling their home for less than it is worth.
Vanessa Corey, for example, short sold her
"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."
Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.
Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.
"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a
Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.
"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.
Can they come after you?
Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.
"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in
In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including
Some states, such as
Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.
But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.
"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.
He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.
"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.
Ticking time bomb
What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In
It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their
It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.
"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."
He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.
Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.
Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.
"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."
Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.
Strategic defaults
Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to
"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."
If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.
"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.
Robinson himself knows what can happen. He paid off a deficiency after his own
By Les Christie, staff writer CNNMoney.com, February 3, 2010
