As the First Time Home Buyer Credit was about to expire, a new extension was approved and it included some important changes to the original act that may allow more people to qualify than the original credit.  Here is a summary of the important changes:

1. Existing Home Owners May now Qualify:  If you have owned and used the same residence as your principal residence for any five consecutive years out of the eight years prior to purchase, a new credit of 10% of the purchase price up to $6,500 is available for residences purchased after November 6, 2009.
2. New Home Owners still have up to $8,000 credit available (up to 10% of the purchase price) if they have not owned a home within the past 3 years.
3. Increased AGI (adjusted gross income) limitations apply to purchases after November 6, 2009:  The credit phases out as modified AGI goes from $125,000 to $145,000 (previously $75,000 to $95,000) or from $225,000 to $245,000 (previously $150,000 to $175,000) for individuals filing jointly.
4. The purchase price of the residence can be up to $800,000.
5. The home must be “purchased” through written binding contract before May 1, 2010 and closing must occur before July 1, 2010.
6. No credit is allowed for individuals aged 18 or younger or anyone who may be claimed as a dependent on another return.
7. Homes cannot be acquired from related parties including: your spouse, ancestors (parents, grandparents, etc) or lineal descendants (children, grandchildren, etc),  corporation or partnership in which you own more than 50%.
8. The signed HUD or settlement statement must be attached with the return and the return must be paper filed (no e-filing option).

If the home was purchased before December 1, 2009, an amended 2008 return can be filed to process the credit now or you can wait until the 2009 tax return is prepared.  If the closing was on or after December 1, 2009, the credit must be applied for on the 2009 return.

Keep in mind that the income limitations can be manipulated a bit for married couples or in cases where there are more than one unmarried people buying a home.  If you are over the income limitation jointly, you may still be able to qualify for the credit by filing separately.  If the lower earning spouse still qualifies for the credit based on income, you may still be able to take advantage of the credit by filing separately.  Careful analysis is necessary to determine which method of filing (jointly or separately) yields the lowest overall tax liability.

This credit does not have to be prorated based on the ownership of the home.  Therefore, if unmarried individuals are purchasing a home and one qualifies but the other does not, the full credit may still be available on the lower earner’s tax return.

Realtors and anyone selling a home should also be aware of these credit uses.  Through our niche of working with real estate investors, we have successfully assisted several investors with contract for deed and seller financing arrangements with people who might not otherwise be able to purchase a home on their own.  In a follow up post, I will describe some creative methods of using this home buyer credit for down payment financing methods.

I recently received the following information from Dyches Boddiford via the Metrolina Real Estate Investors Association of Charlotte.  The elimination of the ability to sell property using seller financing is a drastic blow to anyone who owns real estate or may need seller financing options to purchase property.  Please let you voices be heard by contacting your Senator today!

Legislative Alert
Please call, email, write your Senators Today!
Tell them we need them to vote against HR 1728 Sec 101(3)(E)
Let’s Not Lose Owner Financing!

June 5, 2009
From: Dyches Boddiford , www.Assets101.com

Pete Fortunato recently brought this Bill to my attention.  It has already passed the House of Representations and has been sent to the Senate. If it passes in its current form, it will restrict owner financing to once every 36 months (HR 1728 Sec 101(3)(E)). While this may not be much of a problem when we get owner financing from sellers, it severely restricts our ability to sell with owner financing.

Though the bill mainly deals with amendments to Truth-in-Lending for mortgage brokers and banks, this one section could reap havoc. This could limit not only your sales where you take back a mortgage, but your lease-options and land contracts as well.

Click here for the latest version of the Bill.  All owner carryback financing should be exempted from this bill. As one commentator noted, if this is left as is, it is a taking of private property rights. We can wait for someone else to fight it, but as for me, I am contacting my Senators today to let him know what I think. I suggest you do the same.

You can find and contact your Senators here.  Keep it short and to the point, but let them know your thoughts! Pass this eBrief along to your investor friends.

Good investing until next time,

Dyches Boddiford

________________________________________
Copyright 2009, The Oaks Group, Inc. All Rights Reserved.
Reproduction of this material without written permission is prohibited.
Minutemen

Come join me and several other local panelists at this month’s meeting of the Metrolina Real Estate Investors Association.  The monthly meeting will be held Thursday, May 21 at 6:30 p.m at the Hilton Hotel at Tyvola Road and I-77S.    Come out and get your questions answered!  From their best deals to the worst deals, to tips on creating a quality buyer with credit repair tactics, the May meeting has something for everyone.  Current finance issues will be discussed, tips for selling your properties retail, and plenty of time for Q & A. Start making a list of questions for the experts and we’ll see you there!

If you are the owner of a rental property or any real estate in the Charlotte-Mecklenburg County area, you should take note of the current actions and plans of the Charlotte Mecklenburg Police and the Charlotte City Council.  They are currently planning a Rental Property Ordinance that would have some extreme effects on anyone involved in renting property within the county. 

To start, every property owner who rents a residential property would be required to apply for and obtain a license for renting property in the county.  The fee structure for this "business license" has not yet been decided, but any additional fee required to rent a piece of property should be considered a "tax."  This new tax could be based on rental income amounts or the number of properties rented or a fixed fee.  The proposed draft of this ordinance says that the "Rental registration fees shall be established annually, and shall be sufficient to enable the City of Charlotte to recover all costs associated with implementing and managing this ordinance."  This is still up in the air, but any additional tax for a rental property, would need to be added to the rent and would result in higher rent overall in our community.

The purpose of this license is to "minimize and control the adverse effects caused by illegal activities occurring on and in these properties" according to their current draft of the ordinance.  They want to make sure that the city is able to contact the property owners in "order to address disorder calls, health and safety code violations and statutory violations, as well as to implement remedial action programs."  So, although you may own a rental property and pay the real estate taxes that fund the police department to protect your interests, it appears that the city would like you to be responsible for your tenant's actions by getting in the middle of their potential illegal actions like domestic violence, drug dealings, etc.  I don't think this is an optimal situation and could create more problems than it solves.

Through some complex formulas, the policy will be tracking to see if your property is above average for crime calls.  If it is identified as being a high risk, you may be subject to setting a Remedial Action Plan with the police department.  This plan is required and if not agreed upon and completed with a specified period of time, the owner of the property risks having their license to rent revoked.

Then what happens?  Does the property go into foreclosure because you won't be able to rent it anymore?  Rental property owners are doing a service to the community by allowing those who are unable to purchase a home to have a place to live at an affordable rate.  Many of these rental properties are barely covering or do not cover their expenses.  Additional taxes and regulations would deter investors from purchasing real estate in Mecklenburg County and will increase the price of fair housing for those who are already unable to purchase a home.

I personally do not support this ordinance.  I am also a member of the board of directors of the Metrolina Real Estate Investors Association and the board opposes this ordinance and thinks it would have an unfair and detrimental effect for its membership. It appears this issue will be up for a vote in April or May at this point.  I strongly urge you to consider this ordinance and vocalize your concerns to the Charlotte City Council. Pass this information along to others as well since this potential ordinance has not received the media attention it deserves. 

If you would like more information about this ordinance and the details, feel free to comment or contact me.

Donna Bordeaux is a Certified Public Accountant and Personal Financial Specialist with Bordeaux & Bordeaux, CPAs, PA in Lake Wylie, SC (a suburb of Charlotte, NC).  For further information about Donna or her firm, please visit www.yourcpapartners.com.