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Prospective first-time home buyers who have been sitting on the fence now have a significant financial incentive to explore the opportunities available in today’s housing market.

H.R. 3221, the Housing and Economic Recovery Act of 2008 — which was passed by the Congress on July 26 and signed by President Bush on July 30 — allows first-time home buyers to take a $7,500 tax credit from the purchase of a single-family home, townhome or condominium apartment.

To get the word out to the home-buying public, NAHB has assembled materials that will help association members maximize the impact of this temporary sales incentive.

Among those resources:

• NAHB has published a Web site for consumers — www.federalhousingtaxcredit.com. The site includes details and questions and answers on how home buyers can use the credit.
• On www.nahb.org/mythbuster, NAHB has posted talking points, print ads, a consumer handout on the “top reasons you shouldn’t wait to buy a new home” and a banner ad for Web sites — all geared to alerting home buyers to the availability of the credit.

Any home buyer who has not owned a home during the past three years and is a U.S. citizen who files taxes is eligible to participate in this program. (Some home buyers who are not citizens may also qualify; see #14 in the questions and answers below.)

To qualify, buyers must actually close on the sale of the home on or after April 9, 2008 and before July 1, 2009. The original eligibility period expired in April 2009, but following a major grassroots campaign from NAHB members, the period was extended to enable home builders to include the credit in their sales and marketing next spring and into the early summer — the peak home buying season.

The program does have income limits. Single or head-of-household filers can claim the full $7,500 credit if their adjusted gross income (AGI) is less than $75,000. For married couples filing a joint return, the income limit doubles to $150,000.

Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit. The same applies to married couples who earn between $150,000 and $170,000.

The credit is not available for single taxpayers whose AGI is greater than $95,000 and married couples with an AGI exceeding $170,000.

A refundable credit means that if a taxpayer pays less than $7,500 in federal income taxes, the government will write them a check for the difference. For example, if $5,000 in federal taxes is owed, the taxpayer would pay nothing and a $2,500 payment would be received from the IRS. If a qualifying home buyer were owed a $1,000 tax refund, they would receive $8,500.

Buyers can take the tax credit on their 2008 or 2009 tax return. Those who close in 2008 take the credit on their 2008 return. Buyers in 2009 have the option of taking the credit on their 2008 or 2009 returns.

The tax-credit program also has payback provisions.

The credit essentially serves as an interest-free loan to be repaid over 15 years. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. If the home owner sold the home, then the remaining credit would be due from the profit of the home sale.

If there is insufficient profit, then the remaining credit payback would be forgiven.

For more information on NAHB tax credit resources, e-mail NAHB Public Affairs or call 800-368-5242 x8061.

Questions and Answers for Consumers

Following are the “Frequently Asked Questions About the First-Time Home Buyer Tax Credit” that appear on NAHB’s consumer Web site — www.federalhousingtaxcredit.com.

1. Who is eligible to claim the $7,500 tax credit?

First time-home buyers purchasing any kind of home — new or resale — are eligible for the tax credit.

2. What is the definition of a first-time home buyer?

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 homeownership history of both the home buyer and his or her spouse. For example, if you have not owned a home in the past three years but your spouse has owned one, neither you nor your spouse qualifies for the first-time home buyer tax credit.

3. What types of homes will qualify for the tax credit?

Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses, and condominiums.

4. Are there income limits to determine who is eligible to take the tax credit?

Yes. Home buyers who file their taxes as single or head-of-household taxpayers can claim the credit if their modified adjusted gross income (MAGI) is less than $75,000. For married taxpayers filing a joint tax return, the MAGI limit is $150,000. The limit is based on the buyer’s modified adjusted gross income for the year that the house is purchased, except for certain purchases in 2009. 

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, which 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 such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

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 $7,500 are available for some taxpayers whose MAGI exceeds the phase-out limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.

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 $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $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 $7,500 by 0.5. The result is $3,750.

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 $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.

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. Does the credit amount differ based on tax filing status?

No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files its taxes as “married filing separately” (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.

9. Are there any circumstances under which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?

In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.

10. I heard 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 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 15. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed). 

11. What is the difference between a tax credit and a tax deduction?

A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 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% tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer’s tax liability would be reduced by $1,125 (15% of $7,500), or lowered from $7,500 to $6,375.

12. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

No. The tax credit cannot be combined with the MRB home buyer program.

13. I live in the District of Columbia. Can I claim both the D.C. first-time home buyer credit and this new credit?

No. You can claim only one.

14. I am not a U.S. citizen. Can I claim the tax credit? 

Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519 (www.irs.gov/pub/irs-pdf/p519.pdf).

15. Does the credit have to be paid back to the government? If so, what are the payback provisions?

Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

16. Why must the money be repaid?

The intent of Congress was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices and will increase home sales. The repayment requirement reduces the impact on the U.S. Treasury and assumes that home buyers will benefit from stabilized and, eventually, rising future housing prices.

17. Because the money must be repaid, isn’t the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?

Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers more than $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.

18. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on Dec. 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

19. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount

Many of us have taken a vacation and found the North Georgia Mountains the perfect place to retire, buy a 2nd home, or rent a cabin for the weekend. Many people, me included, have actually bought property spontaneously while on vacation — and while that’s not always a horrible idea, a little planning and research prior to your visit will greatly aid you in making a wise buying decision.

Now is probably the best time in many years to find a relative bargain on a mountain property. Prices on cabins, lots and land have come down from their highs of 2005. Finding the best deal involves research, patience, and a good real estate agent. The mortgage market is tightening and buyers must have a solid knowledge of their finances, credit rating and ability to obtain a loan. Getting prequalified by your lender is more important than ever and will help you negotiate the best deal with the seller.

Any real estate purchase involves a market analysis and now it is more important than ever. Many buyers are looking for foreclosures thinking them to be the best deals available. While banks may be willing to take a loss on a foreclosed property it may still be overvalued compared to other properties. Owners who have owned their homes or land for years usually have a lower cost basis and may be more willing to sell at a lower price.

It is important to think about what a second home purchase will do to your overall financial picture. Investing in real estate has been an important strategy for building wealth for many people over the years. Yet it may not be for everyone. You should determine the impact on your long-term financial goals.

Many lenders now require buyers to put down at least 20 percent on a second home or you will have to pay for private mortgage insurance (PMI). Your primary home lender may not want to tackle a vacation home mortgage, often our local banks may be a better option. You may be able to tap into the equity of your existing home for some or all of your down payment.

Renting out your cabin is a good way to cover some of the cost, but lenders often charge a higher interest rate and will look at projected vacancy rates to determine if you qualify for the loan. Insurance costs for a short term vacation rental will be higher than a normal home owner’s policy. Plus, you have to pay the rental management company a management fee sometimes as high as 35%.

On most vacation homes you can write off your interest payments but not much else. Should you decide to put your vacation home in the rental program you may gain more favorable tax write offs. Seek professional tax advice to determine if renting your vacation home makes sense for you. But don’t buy a vacation home for tax reasons alone. If your dream mountain cabin fits into your financial plan and life style and you’ve done your research, it may be the best time in years to buy.

Pat Trainor

www.buyblueridgerealestate.com

www.toccoariverrealestate.com

www.rentgeorgiacabins.com

Arts in the Park will be held Memorial Day weekend, May  24th and 25th from 10:00AM until 6:00 PM. There will be approximately 170 vendor booths that will have all kinds of arts and crafts being displayed by local artists. There will be plenty of food vendors so plan on having lunch while you are there.

You will be able to find everything you need to accessorize your cabin including rustic hand made furniture, chainsaw carvings, photographs, wildlife oil paintings, pottery, jewelry to name a few.  The diversity of crafts on display is amazing and worth seeing even if you don’t own a cabin.

This is one of the busiest weekends in North Georgia, as people from all over, come to Blue Ridge for Arts in the Park. There may be as many as 15,000 to 20,000 people visit the festival over Memorial Day Weekend.

Don’t forget to make reservations as soon as possible. Every rental cabin and most of the hotel rooms, in North Georgia, will be booked Memorial Day weekend. Check out http://www.rentgeorgiacabins.com/ for rental cabin availability.

One of my favorite things about Arts in the Park is to see old customers and friends. It seems that I see everyone I have ever sold a cabin to. This really is a great weekend to come to North Georgia.

Well it is a big weekend in Blue Ridge as the 11^th annual Blue Ridge Mountain Adventure Race takes Place. Some of the best Adventure racers in the country are in Blue Ridge this weekend for this grueling 35 to 40 mile race. Downtown Blue Ridge will be hopping with activity this afternoon.Each 4 man team consists of 3 racers and one support person. Each 3-man team of racers must be co-ed in order to be eligible for trophies, however all male or all female teams are allowed to participate. The majority of the race takes place south of Blue Ridge out the Aska Rd. corridor in the Chattahoochee National forest. This year the race will start at the Toccoa Valley Campground and will take racers 6 to 10 hours to complete the course.

The course of the Blue Ridge Mountain Adventure Race changes from year to year. However  some combination mountain biking, running/trekking, kayaking, canoeing, rappelling, orienteering, wet river crossings and climbing, as well as numerous “mystery challenges will be used.

One of the biggest draws to the Blue Ridge area is the variety of nature trail system of the Chattahoochee National Forest. Race planners will use portions of the Benton MacKaye Trail, the Rich Mountain Wildlife Management Area and Aska Adventure Area and the racers never know exactly what to expect on race day. Water events usually include portions the Toccoa River and Lake Blue Ridge.

Racers have to navigate their way through the course and make decisions along the way. It is not just about speed, endurance and stamina it is about making the correct choices. Even for the best racers it is not uncommon to get lost somewhere along the way.

The racers will finish in downtown Blue Ridge at the park where there will be food vendors and live reggae music by Natti Love Joys. Racers should begin finishing some time between noon and 5 PM so stop by the Blue Ridge Park and join the fun.

Many of our home buyer’s have been vacationing here in the Blue Ridge Mountains for years. Rather than staying in a hotel they often find a good cabin rental company and rent a beautiful log cabin for their visit. The cost is very affordable usually running from $135 to $250 per night and most cabins will accommodate between 4 and 12 guest. For 2 or 3 couples or a family with children the cost is far less than staying in a hotel and there are a great number of advantages.The cabins offer full kitchens and BBQ’s so you don’t have to eat every meal out. They offer areas for the family and friends to spend quality time together, many having game rooms, video games, outdoor fire pits, screened porches where you can watch the wildlife. It really is a lifestyle that no hotel can compete with regardless of the price. After a visit or two many renters fall in love with the mountain life style and begin their search for a cabin of their own.

My wife an I were the classic buyer, after staying in a cozy log cabin on Fightingtown Creek we said to ourselves why are we going back to Florida. After the first week of our vacation we began looking for a cabin on a trout stream. I like woodworking so our big priorities were a large workshop, a trout stream and some beautiful acreage. Five months after our first visit we realized our dream and found the perfect place, well everything but the house, the trout stream was gorgeous filled with rainbow trout. The shop was the right size but needed finishing 3 acres of gentle land with an apple orchard and a great spot for our garden. It only took me 4 years to fix the house but we finally have everything we hoped for and have not regretted the move for a moment.

I highly recommend renting a cabin before you make a buying decision and they provide an enjoyable base of operation during the search. There are things unique to owning in a vacation cabin as opposed to your full time home and staying in a cabin or two will help you make an informed buying decision. Visit http://www.rentgeorgiacabins.com/ where you will find some of the most beautifully appointed cabins in North Georgia. The dream of owning a mountain cabin can be yours, I will be happy to help guide you through the process.

Finally some good news for housing, according to news reports last week sales of existing homes posted a slight increase for the first time in 6 months. Last months gains were driven by more aggressive price cutting by sellers in many parts of the country.  In the South, existing-home sales increased 2.1 percent to an annual rate of 1.99 million in February but are 22.0 percent below February 2007. The median price in the South was $163,400, down 8.6 percent from a year ago.

The National Association of Realtors said that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. Many economists were predicting a small decline and were caught by surprise with the largest increase in the past 12 months. The NAR reported that the median sales price of single family homes fell 8.7%to $213,500 from February 2007.

I do not want to read too much into the one-month rise in sales. The slump in Blue Ridge housing market will likely continue until the high levels of unsold inventories are reduced. Coldwell Banker High Country Realty experienced an increase in activity with 37 sides going to contract for the month of February. Other companies are reporting their traffic is up and they are writing contracts as well.The good news for the North Georgia market is that inventory levels have begun to stabilize around 15,000 listings. The spring and summer buying seasons will be the real test of whether the housing market in North Georgia is in fact bottoming out.

The turn around will not be as quick as equity investors experience in the stock market. It will take time to bleed off the excess inventory; however, we have seen a huge drop off in new construction and land development so the supply of new listings will be primarily resales. Sales have been greater than housing starts on a regular basis since early 2007.
I believe that the worst is behind us and that this may be the best time to buy in many years. Lower interest rates have made mortgages more attractive. The national average for a 30-year conventional fixed mortgage was 5.92% in February, vs. 6.29% a year earlier. There are a host of initiatives being proposed to bolster the sagging market and bail out homeowners facing foreclosure.

 In real estate, it is often essential to try and anticipate the problems that may arise. An experienced agent can help minimize problems by solving them before they become a serious issue. In the mountains, the problems can sometimes be anticipated. For example the problem of pro-rating the cost of propane gas remaining in the tank at time of closing.The new 2008 Georgia Association of Realtor’s contract, in section 5(C) PRORATED AMOUNTS: states that the parties agree to prorate (2) all utility bills as of the date of closing. The question arises-is propane gas a utility and therefore subject to the terms of this section of the contract?

It is unfortunate when the first time this issue arises is the day of closing. But this happens more often than you would imagine. Therefore the closing is halted as all parties negotiate their interpretation of Section 5 (C). The Seller, of course, says that the propane gas is a utility under this section of the contract, and must be prorated. The buyer says, no-it is not a utility under this section and the cost of the propane gas was included in the sales price for the house and no proration is necessary.

Propane tanks are usually leased from the gas company the gas within the tank is bought and paid for by the Seller. So the question arises is the tank a fixture, probably not if it is leased, if the user fails to pay the lease then the gas company will remove the tank. If the seller bought the tank then it would likely be considered a fixture and stay with the house when sold. The gas within the tank is still a question and should be addressed in the purchase and sale agreement to avoid any misunderstandings at closing. Parties are more flexible and negotiable prior to signing the contract than afterward.

Pat Trainor

http://www.buyblueridgerealestate.com/

When purchasing a mountain cabin or property, you will need to learn a lot about the area where you want to buy. Buying mountain property will likely be significantly different than anything you have purchased before. There are so many things to take into consideration such as septic systems, flood zones, community water systems, maintenance of private roads, maintenance of the cabins exterior to name a few. My experience has been that if a buyer is not able to make an informed decision they will make no decision and delay their dream of owning a mountain cabin.

The best way to become an informed Buyer is to find an experienced real estate agent who is knowledgeable in all aspects of mountain property.  An experienced agent can be helpful in more than just locating active listings for sale. They should be able to answer a wide range of questions providing you the information you need to make an informed decision. Once you have found the perfect cabin an experienced agent will give you an edge when negotiating with the seller and handle all the details between contract and closing.

If you are interviewing agents to represent you, ask him / her two questions:

             How long have you been licensed as an agent?

             How many transactions did you sell last year?

If you don’t work with an experienced agent, you could lose out on benefiting from the expertise that person brings to the table. So make sure you pick one that fits your needs-plus find one you enjoying spending time with.