HOPE real estate tax incentive still alive for potential buyers

The Missouri state program offers up to $1,750 in combined tax, energy efficient improvements for new homeowners.

The Missouri Housing Development Commission is still offering up to a $1,250 credit in real estate tax benefits for qualified buyers through the Home Ownership Purchase Enhancement (HOPE) program. Earlier this year the commission set aside $15 million to encourage home ownership, but it seems potential buyers have been slow on the uptake. Only $1.2 million has been issued, and that with the deadline drawing near.

To qualify, the home must be purchased between January 1, 2010, and August 31, 2010. The HOPE application must be received by the MHDC no later than September 30 of this year. There is also an income limit–up to $95,060 in the St. Louis metro region. First-time and repeat buyers are eligible for the program.

Homebuyers who are approved for the real estate property tax HOPE incentive may also be eligible to receive an additional amount if they bought a qualified newly constructed energy efficient home or bought an existing home and remodeled or purchased items, such as Energy Star® appliances, to make the home more energy efficient. The maximum combined total of the HOPE property tax incentive and the HOPE energy efficiency incentive is $1,750.

For more details, contact us and we can help buyers take advantage of this one-time offer from the state of Missouri.

The FHA 203(k) loan is perfect for homebuyers who want to rescue foreclosed properties

Rehabbers can combine the loan price and improvement costs in one loan

There are homes out there, just waiting to be “adopted” by a loving family. They may be a bit on the ragged side, down on their luck, but with some tender, loving care, a qualified homebuyer and an FHA 203(k) loan, they’ll be returned to their glory.

We’re talking about foreclosed properties that aren’t in tip top shape, but deserve a chance and are manageable rehabs.

This HUD program, administered through the Federal Housing Administration (FHA), is not a new idea. More than 31 years old, the 203(k) is a loan that includes both the purchase price and the rehab price for a qualified buyer to fix up the place. Because of the amount of foreclosed properties now, this type of loan is very attractive for the buyer who sees value at the end and doesn’t mind rolling up his or her sleeves.

There are two types of 203(k) loans–the full deal for major rehabs and really big projects, and the Streamline 203(k) that tops out the rehab budget at $35,000. This is an excellent way to go for properties that need some sprucing up and energy efficient improvements. It’s amazing how far $35,000 will go to transform a home. Qualifying properties include one to four-family structures.

The loans are granted through FHA lenders. When the purchaser is approved, the down payment will be 3.5%. The potential buyer is responsible for working with an approved contractor and designing a bid for the rehab. The bid must be very detailed, including plans, materials, labor, time frame, which can be no more than six months, and an estimated completion value.

This information is necessary to assemble the package and final loan amount. When the project is approved and closed, the buyer will receive up to half the rehab amount to begin work on the house. The final payout comes after the work has been inspected to make sure it conforms to the original plans.

These loans can be more involved that a conventional loan, so it’s best to work with a SCHNEDIER real estate agent who understands the complexities and can recommend a lending institution that is approved to provide the 203(k) loans.

Just think how satisfied you’ll be to rescue a foreclosed property, make a contribution to improving a neighborhood and take part in the housing market recovery.

Check out St. Charles foreclosed homes.

4 Questions You Need to Answer Today

1. Why are the prices of homes dropping substantially in today’s market?

Prices are dropping because of the anomaly that occurred during the market boom. Professor Karl Case of Wellesley College and contributing author of the Case-Schiller Home Prices Indices, a quarterly nominal housing price report, looked closely at the appreciation of median home value over five-year increments dating back to 1980 (see chart: "Appreciation Went Into Overdrive"). His research shows that home values appreciated 26.5 percent on average for the 20-year period from 1980 through 2000.

In the six years that followed, average appreciation was 89 percent. Prices are now adjusting to the inconsistent and unsustainable growth that occurred during the first six years of this decade. In other words, the market is not on the decline. Rather, it is moving toward stability, which will mean healthier markets in the future.

2. How do I determine the direction of prices in my market?

Although there are no steadfast rules to determine future pricing, months’ supply of inventory (total inventory divided by the number of houses sold per month) is a great guideline. A normalized or balanced market has five to six months of inventory. If 100 houses sell a month, there should be 500 to 600 houses in active inventory.

Based on this principle, if you have one to two months of inventory, double-digit appreciation is likely to occur. Lack of supply will cause potential buyers to clamor over the few homes that are for sale, which in turn drives prices higher. On the other end of the spectrum—where many markets are right now—there is a seven- to eight-month inventory. With this abundance of supply, there simply aren’t enough buyers to support the number of homes for sale.

Current economic conditions will also have an effect on the direction of pricing, as pricing is directly connected to average income. Traditionally, the national average sales price of a home is two-and-a-half times the average household income. Through the boom years of 2004, 2005, and even into 2006, that ratio was distorted, reaching up to four times the average income. We’re now getting much closer to the 2.5 ratio. However, with unemployment rising, prices may have to drop further to stay in line with the average American family income (see chart: "Lots of Listings = Depressed Prices").

3. Why should I buy now?

Any investment consideration, whether it be real estate, gold, or fine art, follows a predictable cycle with nine stages (see chart: "The Stages of a Market Cycle"). Let’s start with optimism, the period in which many people are excited about buying a home. When the market is strong, people’s purchases quickly increase in value, which leads to euphoria, which can lead to rash decision making.

From euphoria starts a downward cycle. As prices start to fall, buyers go into denial, with statements such as "I’ll be in the house a few years, so this won’t be a challenge." After denial comes fear, as prices continue to fall, followed by panic, despondency, and depression. After depression comes hope and then optimism (back to stage one).

The point of maximum risk for any investment is during the euphoria stage. The point of maximum opportunity is at the lowest point, between despondency and depression. That’s exactly where we are in many real estate markets today. Clients who are motivated and qualified to buy will be able to look at the market cycle chart and understand why now is the best time to invest in real estate.

4. Is homeownership really a good way to build wealth?

According to NAR, home values appreciate 4.5 percent annually on average. That’s a great return; however, very few buyers pay in cash. Most try to put as little cash down as possible. The amount of cash buyers put into their home determines their return on equity, which is the total return on the cash they initially invested. So the return on equity can be astronomical. It’s easy to see that real estate isn’t just a good investment; it’s a great investment.


Source: Steve Harney specializes in negotiation and leadership training. He has been in the industry for more than 20 years, first in sales and then as broker-owner of a 500-associate real estate company. Visit him at www.KeepingCurrentMatters.com.

The Right Time to Buy a Home Is Now

Passage of the American Recovery and Reinvestment Act of 2009 is a step in the right direction to help the housing market begin the recovery process. Now, it’s up to potential homebuyers to take that first step too. The $8,000 tax credit couldn’t come at a better time. Late winter and spring are the prime seasons for sellers and buyers who want a change of location, a new school district, to down-size or move on up.

However, time is of the essence. Details of the plan are:

• First-time homebuyers will receive an $8,000 tax credit, or 10 percent of the home’s value, whichever is less. First-time homebuyers are defined as those who have not owned a principle home during the past three years.
• The credit can be applied to either 2008 or 2009 tax returns and does not need to be repaid if the homebuyer lives in the house for a minimum of three years.
• The tax credit applies to first-time buyers who purchase a principle home between January 1, 2009 and December 1, 2009.
• Claiming the tax credit is easy. Once the sale is completed, new first-time buyers can claim the tax credit on their returns. No special forms or documents are required.
• Income restrictions do apply for the tax credit. Single homebuyers must make less than $75,000 and couples less than $150,000.

Mortgage Reduction Component Is Part of the Solution

While the $8,000 tax credit is an incentive to excite new buyers about home ownership and reduce inventory, the Homeowner Affordability and Stability Plan takes aim at reducing foreclosures and reducing mortgage payments. Between seven and nine million homeowners could see relief under this plan to partially stem the tide of even more housing stock going into foreclosure.

One feature of the plan focuses on responsible homeowners who continue to pay on their mortgages but at rates higher that the current rates. Because of lack of equity, these homeowners have been unable to refinance at a lower rate. Under this plan, qualified homeowners in good standing will be eligible to reduce their monthly rate, and free up the balance of the payment for potential spending.

For those at risk of losing their homes, a second feature of this plan aims to provide incentives for those entities in the housing industry, such as lenders, mortgage holders and borrowers to provide more affordable conditions for responsible homeowners in these circumstances.

This federal assistance is another step in reaffirming a robust society, and to begin the long road back to responsibility and a sense of hopefulness.