Iowa City Real Estate Blog: November 2009

Iowa City Real Estate: Homebuyer Tax Credit Extension: How Does It Work?

Recently I got asked how the homebuyer tax credit works. It seems like a simple enough question for those of us who talk about this on a daily basis... Let's see how I do with basic information for those of you who don't think real estate 24/7...

The first thing you need to do is establish whether you qualify for the tax credit. You probably have an idea already. If you're not totally sure you can check by looking at the FAQ's on the IRS website. It's recently been updated to include info on the new expanded homebuyer tax credit that includes repeat buyers.


So now I'm going to state the obvious and tell you that you need to buy a home. Already here there is some confusion with some folks who think you can claim the tax credit before you buy a home. That is not the case. You absolutely need to close on a home before you can claim the tax credit. The current requirement is with the new extended tax credit that you have an accepted offer on a home by April 30, 2010 and that you close on that home by June 30, 2010.

So now how do you go about claiming the tax credit? What happens is that you file your taxes as usual and fill out the form 5405 claiming the amount you qualify for. Bear in mind that the IRS is tightening its procedures. If you filed your tax return last year and claimed the first time homebuyer credit you didn't need to provide proof that you had bought a home (!!) That changed with the new extended tax credit and it will now be necessary to submit the settlement statement, (HUD), that you sign at closing.

It's because of the number of issues with fraud the IRS has changed its procedures with the new extended and expanded credit and it's not possible to file your 2009 return electronically to claim the home buyer tax credit. You will need to file a paper return by mail.

Now comes the big question. What do you do if closing is AFTER April 15, 2010, the deadline for filing your 2009 tax return? Easy answer: Hold off on filing your taxes and request an extension. The extension will give you all the way up to October 15 to file your 2009 tax return. Plenty of time, since one way or another you need to buy a home by June 30 anyway. If filing an extension sounds like a hassle, take it from me, it isn't. My son did it last year at Taxslayer.com and it went as easy as 1-2-3.

One last thing I want to point out is that this is a refundable credit. What that means is that if the amount of the tax credit exceeds your tax liability you will get a check in the mail for the difference.

Below are some previous posts on related subjects that may be of interest. Keep in mind that I help clients buy and sell real estate in the Iowa City, Coralville and North Liberty area. Please let me know if you have any questions.


Expanded Homebuyer Credit Now Includes Repeat Buyers

You Don't Need to Sell Your Home To Qualify for the Tax Credit

Buying Your First Home

Buying a Home: What Will the Seller Think of Paying Your Closing Costs?

Coralville Home Sellers Market Update November 2009

It's coming to the end of the month and almost time for my monthly real estate market report giving a general picture of how the market is trending in Coralville. As we are going through a time of transition I figured it would be a good time to put together a few numbers with home sellers in mind. If you have your home listed right now, or are thinking about listing it, then the idea is to look at the real estate market from your perspective.



17 Homes sold in Coralville November 1 - November 23

That's a 31% increase over last year. 13 homes sold in Coralville in November 2008

7 of the homes sold were priced below $200,000. Coralville bucks the trend of both Iowa City and North Liberty in that there is a higher percentage of higher priced homes sold than lower priced homes.

Average sale price: $211,163

Average Days on Market: 96


Active Listings: 183

Absorption Rate: 6.9 Months (Here's an explanation of how the absorption rate is calculated if you need it).


Coralville has stiff competition when it comes to home prices in Iowa City and North Liberty, especially when it comes to lower priced homes. In a price driven market where buyers are looking for deals this means if you're thinking of selling your home in Coralville, you really need to look at the bigger picture before you list your home for sale. The new tax credit for repeat buyers  should impact the Coralville market in a positive way, although at this point it's a little early to tell. The first time homebuyer tax credit did not impact Coralville in any significant way, so I'm not going to stick my neck out on that one!
 
There are so many nuances when it comes to selling a home. If you are thinking of selling your home in Coralville in the near future and would like to talk about your specific situation, please contact me @ 319-400-0268.

North Liberty Iowa Home Sellers Market Update November 2009

It's coming to the end of the month and almost time for my monthly real estate market report giving a general picture of how the market is trending in North Liberty. We are in a time of transition so I figured it would be a good time to put together a few numbers with home sellers in mind. If you have your home listed right now, or are thinking about listing it, then the idea is to look at the real estate market from your perspective.



45 Homes sold North Liberty November 1 - November 23

That's a 50% increase over last year already, (and we still have a few days left in November). 30 homes sold in North Liberty in November 2008.

39 of the homes sold were priced below $200,000. (A pretty good sign that it's still the first time home buyer that's driving the market in North Liberty).

Average sale price: $150,807

Average Days on Market: 111


Active Listings: 252

Absorption Rate: 4.7 Months (Here's an explanation of how the absorption rate is calculated if you need it).


North Liberty remains a hot tip in the area. In fact with 4.7 months absorption rate, North Liberty is trending towards a sellers market and with the new tax credit for repeat buyers there's a good chance this trend will improve even more in the coming months. That's the good news. Even in North Liberty though sellers can't afford to be complacent. We still have a price driven market place. When you list your home for sale you will do best if you keep that in mind.

There are so many nuances when it comes to selling a home. If you are thinking of selling your home in North Liberty in the near future and would like to talk about your specific situation, please contact me @ 319-400-0268.

Iowa City Home Sellers Market Update November 2009

It's coming to the end of the month and almost time for my monthly real estate market report giving a general picture of how the market in Iowa City is trending. As we work our way through a time of transition I figured it would be a good time to put together a few numbers with home sellers in mind. If you have your home listed right now, or are thinking about listing it, then the idea is to look at the real estate market from your perspective.



Homes sold in Iowa City November 1 - November 23: 49

That's an increase of 58% over last year already - 31 homes sold in the entire month of November 2008.

33 of the homes sold were priced below $200,000, the remaining 16 obviously above.

Average sale price: $186,263

Average Days on Market: 104


Active Listings: 530

Absorption Rate: 7.2 Months (Here's an explanation on how the absorption rate is calculated if you need it).


Home sales are up significantly for the month. With the new tax credit for repeat buyers there's a good chance this trend will continue and improve in the coming months. As a seller though you can't afford to be complacent about that. We still have a high inventory of homes on the market, so buyers can afford to be picky. When you list your home for sale you will do best when you keep that in mind. Your home needs to be priced right and look spectacular to get a buyers attention in the current market. We haven't made the transition to a sellers market so far, so nothing's changed there just yet.

There are so many nuances when it comes to selling a home. If you are thinking of selling your home in Iowa City in the near future and would like to talk about your specific situation, please contact me @ 319-400-0268.

You don't need to sell your home to qualify for the $6500 Tax Credit. Since day one when the extended home buyer tax credit became law I've been waiting for an answer to that question. Well, here's the answer from the IRS site:

Q: I'm already a homeowner: If I buy a replacement home to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?

A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. You must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive period during the eight-year period that ended on the date the replacement home is purchased. (11/17/09).

When I'm out and about I often get asked questions about the tax credit. In this case I got asked the question by someone who is thinking of renting his current residence and upgrading into a bigger home. What I intend to do is pick up on these questions individually, rather than make a long confusing post with reams of information in it. That way you get to pick and choose the topics that apply to you.

For those of you interested in learning more right now, here's the most current link to the IRS site, where they have Homebuyer tax credit questions and answers for homes purchased after November 6, 2009 when the new tax credit became law.

There have been several posts in the last week about the merits of buyer agency. I personally think buying or selling you should have your own agent. You wouldn't dream of going to court, even for the smallest thing and use the same attorney as the guy (or gal) you're up against, would you?

Why do that in a real estate transaction? If you're  a buyer, it's not just that it's the biggest financial transaction of your life. It's also the place you're going to spend significant chunks of time in the next few years. You want to make sure you're close to what you need to be. That the kids have an easy time getting back and forth to school, that you feel comfortable and it feels right when you go home at night.

If you're a seller you want to make sure you're not jibbed. That you get what your home is worth. For you it's mostly about the bottom line. Very often your bottom line is what dictates what happens next and how much home you can afford when you move up or down.

Buyers and sellers have different motivating factors. I think the most obvious is that a buyer will always want to pay the lowest price possible. The seller will always want to make as much money as possible. How can one agent representing two parties achieve both those goals? There's a conflict of interest right there... I could go on, but I think I've already made my point!

So how do you go about finding the right agent? The first thing you do is to try and figure out what is important to you. Then you talk to a few agents and figure out if it's important to them too. Empathy is what it's all about. Trust your gut. Just because buying or selling real estate is a big deal, doesn't mean you need to be intimidated by the so-called Professional in front of you. If it walks like a duck and quacks like a duck, it probably is a duck. Move on... I'm sure where you work you have colleagues who go the extra mile and others who just show up every day. It's the same with Realtors. Some just show up. You don't want one of those. Move on...Find yourself someone willing to go the extra mile.

Yesterday I spent the day with new friends watching college football, drinking beer and eating all day long...Sounds great, right? It was. And it was just what the doctor ordered after a very topsy turvy couple of days...

Topsy turvy might be a tiny bit of an understatement when you learn I'm writing this post in a hotel room on my laptop after an attic fire in my home made it inhabitable for the time being!

Yesterday morning I was feeling low thinking about all the restoration work that needs to be done before I can return to my home. Today, after a perfectly normal Saturday I'm happy my laptop is in fine shape and probably many of my personal belongings will be able to be salvaged. (The Dyson and my PC are probably write-offs, but it's the Dyson that gets the most air play when anyone asks!)

This is definitely right up there when it comes to lousy experiences in my life. (And if you read my last post on Remembrance Day you'll know I've been around the block a few times). As it turns out though, this is another one of those times where I have an opportunity to grow. I'm sure I'll have lots to share with you in future posts about what to watch out for if you ever get hit by a personal catastrophe like this.

The biggest thing I am taking away from this up to now is that this is a time when neighbors become new friends and make what is an absolutely awful experience so much easier to bear. The two guys in the picture are meeting for the first time. My house burning impacted three families - and these two are members of the other two  families.  As you can see, love at first sight... Well, maybe not love, but there's certainly something going on...

Veterans Day, aka Remembrance Day in other parts of the world. I'm having trouble concentrating on work today, because my thoughts are all over the map. I'm the daughter of a British Serviceman who served Queen and country for 22 years in many different countries in the world.  I'm also the sister of a British Serviceman who served for 12 years with 3 tours of duty in Ireland...(A different and very nerve wracking kind of war). And then there's my sons German grandfather who served on the Russian front in World War II...

Where do I start? Maybe with my own personal experiences of a different kind of war - The Cold War. After a childhood traveling with the British Military I had trouble settling down in my fathers hometown in Wales and moved to Germany in 1978. There I had close hand experience of living in the center of Europe during the Cold War era. There were a lot of military personnel  provided by the allies at that time, (including my brother), who were all there to make sure we didn't get invaded by Russia. I'm not saying we spent our days thinking about that possibility, but there were times it was apparent that we were living in an "occupied" country. I remember visiting my brother when he was stationed in Lemgo. What a different world that was to "my" Germany. Army bases create mini-worlds in the countries they occupy. This was something I knew from when I was growing up - This was just the first time I was seeing it from the other side of the fence!

Just a couple of days ago we celebrated the 20 Year Anniversary of the fall of the Berlin Wall and the end of the Cold War era. I lived in Germany for 11 years before the Berlin Wall came down and 10 after. All I can say is, what a difference a day makes! Although it was actually a couple of years in the making... Mikhail Gorbachev started Perestroika and shook things up in Eastern Europe. In May 1989 Hungary opened its borders to Austria and presto East Germans had access to West Germany. We watched this unfold in West Germany and could see where it was heading. We figured somehow the leaders in East Germany would come up with a way to stop the flow of their citizens out of the country. They didn't! And the rest is history...

By now you can probably see why my thoughts are all over the map today. I have had so many different experiences, some personal and some second hand as a family member over the years. Experiencing the end of the Cold War was like coming out from under a cloud into the sunshine. And I was living in the West. Can you imagine how they felt in the East?

 
And then there are my experiences as a family member. Soldiers don't talk about their experiences, but you can often feel their pain as a family member. It was difficult re-adjusting to having my father around after constant absences. He was often moody and abusive. As an adult I understand why that was, as a child it was difficult. My brother was always very "jumpy" after tours to Ireland, where he constantly had to watch his back. My German Father-in-law came back from the Russian front in World War II with a body wracked by war, unable to work for the rest of his life.


These are all the people I think about today, along with anyone who puts themself in harms way for their country in the name of democracy. I also think of the families of those same people. Most of us don't realize the sacrifices they make while their loved ones are protecting us.

Remember, soldiers don't start wars, they just fight them. And as a beautiful illustration of that fact I'm ending this post with a letter from an American soldier printed in our local newspaper, The Press Citizen this morning written on November 12, 1918.

A $1500 Federal Tax Credit for energy saving home improvements that save you money - That's a win - win all the way for any home owner...

The cold season is here in Iowa, at least according to the calender. Right now we're enjoying unseasonably warm weather here in Iowa City and it almost feels like spring... Don't be fooled though, winter is around the corner and now is a great time to take care of some home improvements AND lower your bills in the winter months ahead. And while you're at it, remember that you may be eligible for federal tax credits for many home improvements you make in your home that save energy...

Tax credits are available for eligible purchases at 30% of the cost up to $1,500 for 2009 and 2010. Some of the more common eligible purchases are windows and doors, insulation, heating and air-conditioning systems and water heaters. It’s already in our own best interest to buy energy star products. Why not get paid by the government for doing it?

My first tip to you if you're living in an older home in Iowa City is to check out how much insulation you have in your attic. Until recently it was standard for homes in our area to have a  3 - 4 inches of insulation in the attic. Current data shows us that we need a minimum of 10 - 14 inches, (depending on the type of insulation used), to effectively keep the heat in our homes from going up and out of the roof. In fact, adding just 10 inches of insulation is likely to save us 20% on heating cost. Insulation is pretty cheap, so we're talking a good bang for the buck here!

Now before you rush off to spend money on home improvements, we know we can rely on the government to complicate the process when it comes to the eligibility requirements for this credit, so the best thing is to do is go to the government's EnergyStar Website and check out exactly what qualifies for the credit. Just as an example, the standard required for windows in 2009 is different to 2010 (!)

Below are some of the basic requirements as far as the standard type of home improvement I’m talking about in this post. There are different time lines and requirements for solar, wind and geo-thermal energy that I’m not going into here. You’ll find more info about that on the EnergyStar Website.

• The tax credit is available for products “placed in service” from January 1, 2009 - December 31, 2010
• Eligible on improvements to the homeowners primary residence only
• Installation costs are not eligible for the tax credit
• A total of $1500 can be claimed in the two year period 2009 through 2010

The extended and expanded home buyer credit is no longer exclusively for first time home buyers and now includes what they're calling "repeat" buyers. This new and expanded credit went into effect on November 6, the day it was signed by President Obama.

The first time home buyer credit has had a positive impact on home sales in the Iowa City real estate market and this new expansion of the homebuyer credit should impact homes sales in the higher priced "move up" category with a tax incentive of up to $6500 for repeat buyers. To be eligible for the up to $6500 homebuyer tax credit, you need to have resided in your home as a principal residence for 5 consecutive years in the last 8 years previous to buying the replacement home. Keep in mind, to qualify for the credit it is the closing date that counts. As we draw closer to April 30, then the accepted offer date will become an issue, but for the moment the closing date is what we need to focus on.


Also, I can't imagine I'm the only person to see this, but if you sold your home 3 years ago even if you lived there for 5 consecutive years, you may be eligible for the $8000 tax credit as a first time home buyer, so why would you apply for the lesser amount? There probably aren't too many people in this postion anyway, just wondering that's all... (According to the IRS a first time home buyer is someone who has not owned a principal residence for 3 years prior to the date of purchase).

As I mentioned earlier, although the Iowa City real estate market is doing well when it comes to the sale of lower priced homes, we're hoping this will impact the home sales of higher priced homes as "move up" buyers upgrade their homes. Don't let that fact stop you if you're thinking of down grading your home though - You too are eligible for the tax credit!

Now let's take a look at the general eligibility requirements for the new expanded home buyer tax credit for both first time home buyers and repeat buyers. First of all, you need to have an accepted offer on a home by April 30, 2010 and close by June 30, 2010.

There are a couple of changes in the expanded homebuyer tax credit compared to the tax credit that expired on November 30, 2009. The first is that the income levels of individuals able to claim the tax credit have risen. A single person may now earn up to $125,000 and married couples $225,000. There is also now a cap of $800,000 on the price of a home.

Now with all this talk about enactment date, accepted offers and cut off dates, I think it might be a good idea to stress the point that to qualify for the tax credit it's the closing date that counts. For more detailed information and FAQ's, visit www.Federalhousingtaxcredit.com.

Buying or Selling, more than likely you'd like to know our market is trending. Below are links  to market reports for Iowa City, Coralville and North Liberty for 2009. They include the yearly numbers along with the quarterly numbers. There was a lot to report with a whole year to look back on!

Iowa City Real Estate Market Report December 2009

Coralville Real Estate Market Report December 2009

North Liberty Real Estate Market Report December 2009

To keep up to date with the latest market reports for the Iowa City area, along with other real estate news and community info, why not follow me on twitter or Facebook or subscribe to my blog below?