Posts Tagged ‘rent’

December 22, 2009 — Realty Times Feature Article by Bob Hunt

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Move up, move down, move sideways; it just doesn’t matter. Whichever direction you move, financially, you may still qualify for the new tax credit available to current homeowners. It is unfortunate that the credit has too often been characterized as a credit for “move-up” homeowners. The phrase carries the implication that the new home must cost more than the sale price of the former one. Indeed, even the November 6 White House Press Release said that the credit would be available to qualified homeowners who “wish to step up to a new home.” Same implication.

So, it is worth emphasizing that the credit is equally available to homeowners who are moving down, cost-wise.

The move-down homebuyer is not an unusual phenomenon. For years retirees have been known to move from a larger home to one that is smaller and often less expensive. Moreover, it is reasonable to think that current economic conditions may lead to even more move-down buyers. Just as thousands of families have found it necessary or desirable to downsize with respect to their cars and their general lifestyle, so it may be when it comes to considering the costs of owning and maintaining a larger house than they really need.

The same requirements apply to both move-down and move-up buyers.

First of all, the previous home must have been occupied as the buyer’s principal residence for at least five consecutive years out of the past eight years. Two examples: (1) Suppose that during the past eight years you occupied the property for three years, then rented it out for two years (perhaps because of a job transfer or temporary assignment), and then occupied it again for three years up until now. Even though you had occupied the property as your principal residence for six of the past eight years, you would not be eligible because you had not occupied it for five consecutive years. (I’m not saying this makes sense; I’m just reporting on the requirements.) (2) Suppose you bought a home eight (or more) years ago, you occupied it as a principal residence until two years ago when you sold it. Would you qualify? Yes, because you had occupied it as a principal residence Read the rest of this entry »

October 27, 2009 — Realty Times Feature Article by Bob Hunt

The clock is ticking. Time is running out. To be exact, time runs out midnight, November 30, 2009. Many readers will know what I am referring to. Under the American Recovery and Reinvestment Act of 2009, November 30 is the last day for a home purchased by a first-time home buyer to qualify for the $8,000 tax credit. The purchase must be closed and title transferred by that date. It will not be sufficient simply to be under contract or in escrow.

By way of a brief refresher:

1. The tax credit is for first-time home buyers only. For the program, the IRS defines a first-time home buyer as someone who has not owned a principal residence for the past three years.
2. The credit does not have to be repaid.
3. The tax credit is equal to 10% of the home’s purchase price, up to a maximum of $8,000.
4. The credit is available for homes purchased (closed) on or after January 1, 2009 and before December 1, 2009.
5. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
6. The credit can be taken for either 2008 or 2009 taxes. In the former case, an amended return can be filed.

By all accounts the program has been extremely popular – which is to say, successful. The National Association of Realtors® (NAR) estimated that, by September, about 1.1 million first time home buyers had used the program; and another 700,000 are expected to do so. Already, the Treasury Department has reported nearly 315,000 people have claimed the tax credit after filing an amended 2008 return.

As enacted, the program is set to expire at the end of November. A number of bills have been introduced to extend and/or expand it. Representative Eddie Johnson (D-Texas) introduced a bill to extend the program through 2010. Another would also expand it to all home buyers. In the Senate, a bill co-sponsored by Johnny Isakson (R-Georgia) and Chris Dodd (D-Conn.) would expand the tax credit to $15,000 and make it available to any buyer regardless of income.

One would think that at least the modest proposal for an extension would be a no-brainer. It is a government program that is working, for goodness sakes. But even that legislation is in doubt. Two obstacles are cited. One is the cost. Extending this program would result in reduced future revenues. The second problem is that such a bill will have a hard time receiving any attention while the Congress is – for the next foreseeable months – focused on considerably higher profile items such as health-care and Afghanistan.

The first so-called problem seems just crazy. Suppose an extension generated an extra 1 million sales. That would result in $8 billion in unrealized tax revenues. Now that is a lot of money; but it is chump change compared to the amounts that have been lavished on financial firms and auto makers, with yet to be determined beneficial effects. The tax credit program only costs money if it works. Its cost is proportional to its success. If it didn’t work at all, it wouldn’t cost a dime. Imagine that for a government program.

The second problem is realistic. There’s a lot of heavy-duty stuff going on. But, it would seem a simple extension of the program could be achieved with very little ado and virtually no distractions from the “big issues.”

Meanwhile, what should interested parties do?

1. If you are a first-time home buyer, you had better get off the dime. There’s certainly no guarantee the program will be extended.
2. If you are a real estate agent, pass #1 along to every potential first-time buyer that you know.
3. Whether you are a Realtor® or not, if you believe in extending the program, let your representatives know.
4. If you are a member of the Realtor® organization, respond to NAR’s call for action, supporting its lobbying efforts.

For more information, call Prudential Vision Properties at 573-449-6200 to speak with a real estate expert without any obligation or cost. You can also email your questions to info@PrudentialVision.com (email responses usually come back within the hour)

To understand the rent vs. buy decision, analyze your personal situation. The first variable is your current rent. The decision to buy rests on the advantages accumulated beyond the term of your lease. You should estimate the annual rent increases that you will have to pay if you rent longer than one year. Then factor in your renter’s insurance. While renter’s insurance is on contents, this amount will offset some of the insurance that you will pay as a homeowner. Normally utility costs are not factored in unless you are in a unit where the landlord pays all or some of your utility bills.

When calculating the buy side of the decision, factor in the purchase price. You should calculate an appreciation rate for the property based on a percentage of the purchase price. This will have to be an estimate because it is a future event. Consider also the savings rate that your down payment would earn if you continued to rent and left this money in savings.

Estimate the number of years you expect to own the property. This figure will be personal. If you are starting your career or are in a job where you expect advancement, then it is likely that you will sell the property sooner than later. Typical reasons for selling include changes in marital status or family size, anticipated job transfer, and upward or downward employment growth.

Consider the yearly expenses in owning a home. You will need the interest rate and term of the mortgage, annual property taxes, and estimated annual maintenance. An older home will require more maintenance than a newer one. Finally, the loan expenses when you purchase, and homeowner’s insurance and selling costs when you finally liquidate the property are factored in.

To calculate the financial advantages of buying vs. renting, go to www.FinanCenter.com and click on Home Center.

To reach any of our experts on the rent vs. buy decision, contact a Prudential agent today at 573-449-6200 or email us at info@PrudentialVision.com.

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The decision to rent vs. buy is a very personal one. There are many sound reasons to purchase a home: equity build-up, an $8000 Tax Credit to First Time Home Buyers, capital gain when you sell, and the enjoyment of ownership. The purchase of a home requires a cash investment and taking on debt. Naturally you must have saved enough cash, be able to make future payments, and also have enough time and resources to maintain your home.

The cash investment is applied toward your down payment, closing costs, and prepaid items. Some of these items are not easily recouped if you should sell the home you buy in the short term. Buyers need to consider how long they will own the property before selling. If you intend to occupy the property for a short period of time, then the financial benefits of owning the property are diluted.

In financially analyzing the rent vs. buy decision, you should compare your current rent, future increases, and the renters insurance that you are now paying to the monthly house payment, future appreciation, maintenance and capital gain when you sell. The house payment normally includes your principal repayment of the mortgage, the interest owed on the mortgage, the property taxes, and property insurance. (This is called your PITI, which stands for principal, interest, taxes and insurance.) With time, your property should appreciate or increase in value.*

The rent you pay a landlord is never recouped and none of the rent is tax deductible. When you buy a home, the yearly property taxes, interest, and some of the closing costs are tax deductible.

To learn more about calculating the advantages of buying vs. renting, go to www.FinanCenter.com and click on Home Center.

*Property appreciation is dependent on many market factors. It cannot be accurately predicted because it is a future event. Your sales professional can give you past sales prices of properties in a given area but cannot promise you any specific increase in value.

Contact Prudential Vision Properties at 573-449-6200 or email us at info@PrudentialVision.com. Our experts are happy to consult with you under absolutely NO obligation.

By Kim Coleman-Prudential Vision Properties

Home-price adjustments in markets around the country have opened doors of opportunity for many renters. If you are transitioning from renter to homeowner, the prospect of making such a large investment may be exciting, while at the same time overwhelming. But it doesn’t have to be. Here are six common mistakes to avoid.

1. Not understanding the homebuying process. Educate yourself. Find a homebuyer seminar that you can attend or research online. The U.S. Department of Housing and Urban Development Web site (www.hud.gov) has an entire section devoted to homebuyers with common questions of first-time homebuyers, mortgage and home-buying programs information, downloadable tools such as a wish list and home-shopping checklist, tips on selecting a real estate professional, etc. Likewise, Prudential Real Estate’s popular Web site, prudential.com/realestate, offers consumers brand-new tools for the homebuying process, such as free home environmental reports, Value Range Estimates and Property Profiles, among other resources.

2. Not asking questions. There are many facets and intricacies to the homebuying process, so although you may gain a basic knowledge, you will still have questions. Don’t hesitate to let your real estate professional know that you are new to the process. Make sure you choose a sales professional who is willing to spend time with you and walk you through the entire process. He or she will expect you to have questions at each step—from house hunting, to making an offer to the closing. Remember, this is one of the largest financial transactions of your life, so you want to have a clear understanding of what’s going on.

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