Special Tax Break on New Car Purchases in Oregon!

IRS Updates

Special Tax Break on New Car Purchases Available in States with No Sales Tax

A tax break for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.  The IRS and Treasury have determined that purchases made in states without a sales tax — Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — can also qualify for the deduction.  Taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.

To qualify for this deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.  The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

Click here for more information from the IRS:

http://www.irs.gov/newsroom/article/0,,id=209624,00.html

Weekly Reviews of Property Showing Activity..Movin’ on UP!

Activity up again in Oregon, down in Washington  

Comparing Supra lockbox openings by RMLS™ subscribers between June 1, 2009 and June 14, 2009 there was a 1.4% increase in Oregon and a 3.5% decrease in Washington from the previous week.

Oregon

Washington

What is Agency and What Does it Mean to a Buyer or Seller?

AGENCY! How exactly does “agency” apply to real estate and the relationships between buyer and seller and their real estate agent in our Portland Oregon real estate market?  What are the responsibilities and obligations?  AND, what are the subtleties that influence everyday behavior of agents and their clients.  I actually practiced the profession of real estate for years (1985 till 1996) prior to having a reasonable and rational “legally defined” relationship with my buyers.  Prior to 1996, all agents had a fiduciary responsibility to the seller.  Which, of course, was always a bit silly for agents who had clients who were buyers, who often never met or had contact with the seller (other than a possible presentation of an offer to a seller….much more common in the pre-technology days) and who were truly advising their buyers on the next home or investment!  The “old way” of thinking was that the seller paid the commission, thus all agents in the transaction were representing the seller.  Thankfully, reason prevailed and the Oregon Real Estate Agency enacted the Buyer and Seller Agency agreements and everyone agreed that the commission structure was built into the pricing of homes! 

Skip forward to present day, where buyer representation and seller representation is SOMEWHAT of an assumption.  However, I think some people are still confused.  When I list a home, I am responsible to the seller.  I prefer the new and next buyer come represented by their own agent.  That way there is NO conflict of interest.  I’m not saying I haven’t handled both sides of transactions in my 24 years of servicing real estate transactions, but those are special circumstances and that’s another blog altogether (having to do with integrity and believing in “win-win”).  Agency simply means my job is to represent your property in the marketing efforts and ensuing negotiations.  My first step is to initiate whatever means I can employ to get “product awareness” to the general public.  That means I’m first communicating with other agents, utilizing the #1 advantage Realtors have, which is the power of the real estate community!!  I employ the power of our Portland RMLS (Realtor’s Multiple Listing System) where all working Realtors are immediately notified of properties that come on market with detailed information, photographs and video tours.  Because over 90% of all buyers begin their new home or investment property searches on the web, your property deserves the very best online exposure possible. 

But, here’s where clarification is important.  As a listing agent I’m, personally, “famous” or “infamous” in quickly reacting to potential buyer inquiries.  I never even ask if someone has a real estate agent representing them.  If they want to see MY listing, I want to show them!  It’s in my best interest and the best interest of my seller for me to show my listings.  I know THAT particular listing better than most!  Do I care if they have their own representation…absolutely NOT!  That is in the best interest of the buyer, which means ultimately, its in the best interest of my seller.  So, therein lies the confusion.  When a seller calls and asks, “how many times have YOU shown the listing” it’s a meaningless question.  If you’re talking to me, I’ve shown it as many times as I had an opportunity!!!  But, that’s not representative of how many inquiries I may have had.  An agent will often get multiple e-mails and phone calls from both agents AND the general public, looking for any specific information they can’t garner from their web experience.  At higher price points, you don’t generally have buyers wandering “willy-nilly” through open houses or calling a ga-zillion agents for information.  Those buyers will hire a specific agent, utilize that agent’s expertise and contacts and have that agent organize a targeted and efficient tour of homes that fall within their chosen price point and other search parameters.  They don’t waste their time looking at overpriced listings or those that don’t present well on the web.  At lower price points, there are more buyers available who, perhaps, have not yet identified an agent of choice and will be more likely to call the listing agent to gather information or schedule a showing.  But, understanding exactly what you are hiring your agent to do is paramount to a successful relationship. 

If you are selling your home, you are hiring an agent to market your property!  This includes exposure to the other agents as well as enticement to agents AND potential buyers through descriptive narrative, professional photographs and multiple web displays.   You are also hiring their expertise on pricing and staging your home to sell.  Listen to them! Remember:  “pricing, pricing, pricing is the new location, location, location”.  Once an offer is procured, your agent is your conduit for negotiations and a resource for various possible repair help and referrals. 

If you are buying a home, you are hiring an agent to provide service through arranging tours and professional advice through their understanding of the local real estate market.  Very few people get “sold” a house.  It’s much too big a decision for someone to “sell you”.  A good buyer’s agent helps you sift through the pros and cons and make an educated decision.  Your agent is a great sounding board and support through brainstorming.  Once you’re ready to make an offer your agent is your negotiator, mentor and source for various referrals to lenders and property inspectors.  Remember:  “buy the least you can buy and still be happy”.

Converting your Existing Home to a Rental!

The Portland Oregon real estate market has, thus far, been spared some of the losses suffered by other areas of the country.  None the less, our market has taken a hit.  Some homeowners have decided that other priorities motivate them to make a move despite the fact that attempting to sell their home may be a challenge in the present market.  Perhaps the challenge is that they haven’t owned it long enough or they’ve taken 2nd mortgages or lines of credit on the property.  Whatever the circumstances, the numbers just don’t work, but that can’t or won’t deter them from their goal.  Many of these homeowners would like to convert their present residence to a rental property instead of selling.  With so many former homeowners coming back into the marketplace as renters, the local Portland rental market has been good and rents were rising through 2007/2008.  Although, I’m noting a bit of a slow-down probably due to the sheer numbers of residences being converted to rentals.  This conversion process of a present principal residence to a rental property, as an alternative to selling, while trying to purchase a new home has been complicated lately by the lending requirements. 

The most stringent new rule requires borrowers to have a reserve amount set aside equal to six months of principal, interest, taxes a insurance (PITI) payments when converting the primary residence to an investment property.  The restrictions placed on the departing property (the one to be rented) (30% equity, 6 months of reserves, signed lease agreement and copy of cancelled security deposit check) are ONLY necessary if the buyer needs to use the proposed rental income in order to qualify for the new mortgage.  If the buyer has enough income to carry the payments on both properties and still be below the debt ratio threshhold, then those criteria don’t apply. The only requirement would be the 6 months of reserves for the rental property. Real Estate Resource is now handling rental properties for our clients, please call if we can be of service!

Portland Oregon Housing Sales Activity!! The Latest and Greatest!

Statistics can be dreary!  On the other hand, number crunchers (like myself) often enjoy tracking local Portland Oregon market stats, especially when there’s a bit of good news!  Year to date compared with 2008, of course, our sales are definitely down with May 2009 down 7.4% over May 2008 and closed sales decreased a whopping 23.4%.  But, in our present real estate market, last year is “ancient history” and really going back more than 3 months is an exercise in futility and exasperation.  So, compare May 2009 with April 2009 and pending sales increased 5.9% and closed sales rose 9.6%!  And, again inventory in months dropped from 11 months to clear existing inventory to 10.2 (and down from 19.2 months in January). So, hey you’ve got to take the morsels and glimmers of the positive where you can!!  It’s more than likely going to be a slow and calculating housing recovery and patience will be a virtue.  For the full report go to:  http://bit.ly/MayMarketStats

Free $$$$ from the IRS is Always a Good Thing!

Portlanders are a frugal bunch and so taking advantage of every single possible tax credit is always prudent, don’t you think?  I believe most everyone has heard about the 1st-time buyer tax credit of $8000.  But, you can’t hear enough about a good thing so I will include some formerly posted FAQ’s about that credit at the end of this post.  This home-buyer credit added to the abundance of inventory with adjusted prices and low interest rates has made certain price points start to move in the Portland Oregon real estate market.

Remember the difference between a “tax deduction” and a “tax credit” is that a credit is a dollar for dollar tax savings and a deduction means your taxable income is less.

There are other tax credits available and free $$$ from the IRS is always a good thing!!  Please click on the following link for more possibilities of saving:  http://bit.ly/TaxCredits

FREE MONEY! First-Time Home Buyer Credit Update AND FAQ’s!

By now, most everyone has heard about the $8000 First-Time Homebuyer credit which allows buyers who have never owned a home OR haven’t owned one in the past three years, to receive an $8000 credit on their tax returns.  Please see the FAQ’s below that discuss the particulars involved in realizing this “free money”!!  Recently the NAR (National Association of Realtors) released a statement that not only could first-time buyers realize an $8000 CREDIT (not DEDUCTION…see difference in the FAQ’s below) but that you could utilize that future credit toward’s your required 3.5% downpayment on FHA (Federal Housing Authority) loans!!  Sound too good to be true??  Well, theoretically “NO”.  HUD (Housing and Urban Development) made several announcements that the $8000 tax credit could now be used for closing costs and pre-paid items on FHA loans.  However, NOT for the required 3.5% down payment.  Some states have already set up programs that will provide short term loans to borrowers that will use as collateral the $8000 tax credit.  Oregon has been “talking about” monetizing the tax credit for several months.  The problem is, where do they get the money that they will, in turn, lend to potential buyers?  This program is only for borrowers who close on their purchase by November 30th of 2009.  So, by the time the state or local agencies figure out how to help fund this process, the credit may be gone.  Since rates have risen as the stock market has improved in the past week or so, buyers may well want to consider finding a way to get a gift for the down payment (if they don’t have their own monies), then negotiate to have the seller pay their closing costs and pre-paid items. That way first-time buyers can get the transaction completed before the credit is gone, collect the $8000 credit and still realize the present great rates.  Here are some frequently asked questions about the first-time buyer tax credit:

The “FIRST-TIME HOME-BUYER CREDIT”    (AND WHAT IT MEANS TO YOU, A FRIEND OR FAMILY MEMBER)!  

PLEASE pass the information to someone you know who might be in the market for their first home!!!

Q:  How much is the tax credit?

A:  The tax credit would be $8,000 or 10% of the purchase price, whichever is less. 

Q:  Who is eligible?

A:  Similar to the $7,500 tax credit included in the Housing and Economic Recovery Act of 2008, the $8,000 tax credit (included in the 2009 Economic Stimulus Plan) is available for the purchase of the primary residence by first-time homebuyers.

Q:  What defines a “first-time home buyer”?

A:  According the IRS, any taxpayer who has not owned a home during the 3 years prior to the date of purchase can qualify for the credit.

Q:  Do I have to repay the $8,000?

A:  No.  Unlike the previous $7,500 tax credit that did have to be repaid (which made it essentially an “interest free loan”), the $8,000 does NOT have to be repaid, UNLESS the home is sold within three years of purchase.  If the home IS sold within that 3 years period the credit is simply reversed.

Q:  What if I have no tax liability?

A:  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.

Q:  Are there any income limitations on the tax credit?

A:  Yes.  The tax credit is strictly for individuals with adjusted gross income (AGI) of under $75,000 or $150,000 for joint filers.  AGI is total income for a year minus certain 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.

Q:  If my AGI is a bit more than the designated $75,000 or $150,000 respectively, can I still claim the credit?

A:  It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose AGI exceeds the phase-out limits. 

Q:  What is the difference between a tax credit and a tax deduction?

A:  A tax credit lowers your tax bill dollar for dollar. A deduction shaves money off your taxable income, so the value depends on your tax bracket. For example, if you’re in the 25% bracket, a $1,000 deduction lowers your tax bill by $250. But a $1,000 credit lowers the bill by the full $1,000, no matter which bracket you might be.

Q:  What type homes qualify for the tax credit?

A:  Included are single-family detached homes, attached homes like townhouses and condominiums, manufactured homes or mobile homes and houseboats (as long as all other criteria are met).

Q:  What is the time frame for completing my purchase to be eligible for the “First-Time Homebuyer” credit?

A:  This tax credit applies to properties purchased on or after January 1^st, 2009 and before December 1^st, 2009 (so there’s still lots of time).  First-time home buyers who purchased a principal residence on or after April 9^th, 2008 and before January 1, 2009 may qualify for the former $7,500 tax credit (which must be repaid, but operates like a zero interest loan).  Purchase date refers to the date you closed escrow on the property.

Q:  What if I am eligible to participate in another state or local first-time homebuyer mortgage program? 

A:  You may now claim the credit (previously this credit was prohibited if you participated in any other first-time homebuyers initiatives).

Q:  What if the home is a short sale or foreclosure?

A:  The credit does apply.

Q:  What if the home is in disrepair and I’m willing to do the work but worried about getting the home financed?

A:  There are two possibilities for financing:  the FHA 203k loan and a conventional “Purchase & Renovate” loan (more to follow on those forms of financing).

Hopeful Signs for the Economy Emerge in Latest Data!

Are we seeing signs of life in our overall economic picture?  And, how will this affect our local housing market?  Could these signs be some indicators that we are near the “bottom”?  This week several factors emerged that could signal a market change.  The stock market showed improvement with the exception of Wednesday’s dip, the bond market fell which contributed to interest rates creeping up.  The bond market is where debt is sold.  Home mortgages, which are packaged together as Mortgage-Backed Securities (MBS) and US Treasuries/Bonds are sold to major investors.  Basically it functions similar to the traditional stock market, with the variant being in terms of what is sold.  Instead of buying shares or “ownership” in a specific company (like stock), the investors are buying the debt, and the right to collect on the debt, plus interest.  If the bond market drops (high supply of debt and low demand) then mortgage rates will rise to make the MBS more attractive.

We’ve had a marked improvement in the number of homes shown in April & May. The majority of the movement in the housing sector was in the 1st-time buyer price range with smart first-time buyers taking advantage of the $8000 credit, increased inventory and lowered prices.  But, this could initiate a trickle up effect into the higher price ranges.  Housing in the Portland metro area was at its most affordable point since December 2004 and inventory dropped to 11 months in April (down from 19.2 months in January).  See the full report at http://bit.ly/LocalMarketStats

Pending sales in Portland have continued to rise (13.6% in 2009 vs 6.8% in 2008 and -2.3% in 2007).  See graph at: http://bit.ly/PendingSales

The Associated Press released this article earlier in the week touting a trio of reports which they believe gave Wall Street a lift, with manufacturing activity shrinking at a slower pace in May, new orders with US factories rose 51.5% in May, construction spending rose .8% in May plus consumers trimmed spending slightly less than forecast.  Check out the entire article at http://bit.ly/Xe1P4

We still have an inventory of short-sales and foreclosures that are affecting the pricing in our local Portland Oregon real estate marketplace and unemployment remains an issue!  The higher interest rates are probably here to stay and are hovering right above 5%, but still historically VERY low!!

Is Pricing a Home to Sale an Art OR a Science?

I’m afraid it’s both and, therein, lies the conundrum!! 

Some Realtors are scientists.  They run the numbers.  They do the math.  They analyze and hope to find the truth.

You can’t ignore the numbers, they don’t lie…..or do they?  The numbers don’t lie but the real estate business deals with humans and they are the “wild card”.  When you deal with humans (and the largest purchase the average human will make is their real estate purchase) you are dealing with emotion!!  Particularly in a residential transaction!

Other Realtors are artists.  They connect and intuit.  These agents are using their gut, acknowledging the experiences they gain everyday by being with other buyers.  This should definitely provide some answers….but will it provide all the answers? 

Are you confused? Well, don’t worry as you are not alone.  We, as professionals working in our chosen field of real estate, are confused in our present marketplace.  I do believe the savvy Realtor has to run the numbers, but in this market, the numbers WILL often lie.  So, you have to add what your gut tells you and what your intuition sells you.  It’s often a “hard sell” to a disappointed seller who doesn’t understand why his property just won’t garner what was hoped.  But, nothing is more disappointing than overpricing your listing and not selling.  You end up “chasing the market down” instead of leveraging what little control a seller might have in this market by pricing correctly.  It ends up a bitter disillusionment for all involved.  It’s not a perfect science or a perfect art, but it does take a lot of cooperation, listening and, most of all, TRUST!