***Looking for "What is an REO?" Keep Scrolling down to November's Realty Scoop...
October's "Realty Scoop"
QRE Answers 8 Questions about the $8,000 1st time home buyers tax credit that you have been dying to know!
The Government says it this way...
"The
American Recovery and Reinvestment Act of 2009 authorizes a tax credit
of up to $8,000 for qualified first-time home buyers purchasing a
principal residence on or after January 1, 2009 and before December 1,
2009."
Now I know what you all might be thinking... huh?! What
does that all mean? How does one "Qualify", what if I'm not sure if I'm
a "first time home buyer"? What kind of Maui Real Estate qualifies as
"principle" residence? What kind of inventory is there in Maui County
that will fit these requirements? You might be in the market for real
estate, but haven't found that place that is just right. Maybe it's too
much, maybe it's a dump, maybe it has a view of the ocean and both are
true! Well here is the good news. You are about to get all the answers
you have been looking for, plus some answers to questions you may have
not known you needed. In addition to laying out the American Recovery
and Reinvestment Act of 2009 in terms we can all understand, Quality
Real Estate specializes in REO property and REO's = more for your
money! So in addition to getting up to a $8,000 tax credit.... your
paying MUCH less to start with by buying an REO home. (Don't know what
an REO is? Check out QRE's last month "Realty Scoop")
Okay on to the answers:
1. Who?
First-time
home buyers purchasing any kind of home—new,resale, foreclosed, REO,
bank owned—are eligible for the tax credit. To qualify for the tax
credit, a home purchase must occur on or after January 1, 2009 and
before December 1, 2009. For the purposes of the tax credit, the
purchase date is the date when closing occurs and the title to the
property transfers to the home owner. This is where QRE's team of
experienced Realtors comes in, we work very effectively as a team. This
maximizes our productivity and minimizes the stress a real estate
transaction.
2. What?
The law defines "first-time home
buyer" as a buyer who has not owned a principal residence during the
three-year period prior to the purchase. For married taxpayers, the law
tests the home ownership history of both the home buyer and his/her
spouse.
For example, if Suzie Smith has not owned a home in the
past three years but your her husband Tom Smith has owned a principal
residence, neither Suzie or Tom qualifies for the first-time home buyer
tax credit. However, unmarried joint purchasers may allocate the credit
amount to any buyer who qualifies as a first-time buyer, such as may
occur if a parent jointly purchases a home with a son or daughter. Here
is where Maui buyers need to pay close attention. If you purchased real
estate within the last 3 years and used it for a vacation rental, you
ARE STILL ELIGIBLE for the tax credit! Here is the exact quote from the
Federal Housing Dept. "Ownership of a vacation home or rental property
not used as a principal residence does not disqualify a buyer as a
first-time home buyer."
3. What does it mean "up to" $8,000 tax credit?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there income limits?
Yes.
The income limit for single taxpayers is $75,000; the limit is $150,000
for married taxpayers filing a joint return. The tax credit amount is
reduced for buyers with a modified adjusted gross income (MAGI) of more
than $75,000 for single taxpayers and $150,000 for married taxpayers
filing a joint return. 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 $95,000 (single) or $170,000 (married)
and is reduced proportionally for taxpayers with MAGIs between these
amounts.
5. MAGI....Huh?
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 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. Can you Explain that to me again?
Just
as an example, assume that our imaginary married couple Tom and Suzie
have a modified adjusted gross income of $160,000. The applicable
phaseout to qualify for the tax credit is $150,000, 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 $8,000 by 0.5. The result is
$4,000.
Here’s another example: assume that an individual home
buyer has a modified adjusted gross income of $88,000. The buyer’s
income exceeds $75,000 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 $8,000 by 0.35 shows that the buyer is
eligible for a partial tax credit of $2,800.
*Please remember
that our 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.
7. How do I actually get the credit?
Participating
in the tax credit program is easy. 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 or
forms 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 first-time 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.
8. What kind of real estate is considered a "Home"?
Any
home that will be used as a principal residence will qualify for the
credit. This includes single-family detached homes, attached homes like
townhouses and condominiums, stand alone ohanas, manufactured homes
(also known as mobile homes) and even houseboats.
Quality Real
Estate has inventory all over Maui County, from Molokai to Lahaina from
Kahului to Wailea and everywhere in between. Let us find you the perfect house, estate,
apartment, condo or townhouse so you can take advantage of the tax
credit now, before it's too late!
(For previous "Realty Scoop" installments scroll down...)
Here is our September installment of "Realty Scoop" September 2, 2009
Enjoy!
What is an REO?
You've
likely heard a lot of buzz about buying foreclosure properties at
auction. While auctions often get bidders good homes at great prices,
they are becoming overcrowded and often result in bidding wars.
Consider using another strategy: hunt after good REO properties.
What
is an REO property you should ask? It is foreclosed house that has gone
to auction and failed to sell, either because it received no bids or
the highest bid was lower than the minimum price the bank would accept
for it. When the house is not bid on or doesn't get as much money as
the bank wants for it, the discounts on the house often become even
greater, since the bank doesn't want to hold on to the property for any
longer than it has to.
When you buy an REO property, there are
many advantages. All liens against the property are removed. Unlike
foreclosure homes for sale at auctions, you are able to inspect the
house before you purchase it. If you find things in the home that need
repair, propose the bank fix them for you. If they know you'll buy the
home with the specified repairs, they may be inclined to make them in
order to sell the house quickly.
Banks don't want to hold on to
REO houses any longer than they have to. They are often willing to make
minor repairs, but don't go overboard. Keep in mind you are likely not
the only person bidding on the property, so act accordingly. Be aware
that you can always have us ask the bank how many offers they currently
have on the home to help you decide on a bid.
REO homes are
listed with all other MLS listings in your area. However, QUALITY REAL
ESTATE specializes in REO's and we have inside connections to find out
about new REO listings before they are released to the general public.
Maui is a hot market and REO properties often have more than one
bidder. QUALITY REAL ESTATE can help you submit the most attractive bid
possible.
Speed is the name of the game when you want to get a
great price on an REO property. QRE specializes in this type of
transaction, we have years of experience in REO
properties. QRE will find some of the most promising properties in
your area and then we can work out a starting and maximum bid with you
for the one you are most interested in purchasing.
No matter how much you like a property, it defeats the
purpose of looking for a great REO deal if you overbid. QRE will
protect you from overbidding. If you can get a better deal elsewhere,
we will inform you. Make sure you listen when your agent tells you to
reconsider your offer.
When you are thinking of buying an REO
property, submitting the right bid is almost as important as finding
the right property. QRE is on the inside track when it comes to finding
a good property to bid on. We also know the proper procedure for
getting you a great deal while keeping you from getting burned on a bad
property.
Whether you are looking to purchase an investment property or a new home, consider the REO market in Maui.
QUALITY REAL ESTATE is your best ally throughout the entire process!
Quality Real Estate LLC
www.Qremaui.com
808-891-1620