The folks at Inman released the news that the House has approved an extension of the closing timeline for 1st time buyers and move-up buyers to get the tax credits offered for purchasing during the specified time limit. However, we’re still waiting for final news that the Senate has also approved it. Keep your eyes and ears peeled for it, but in the meantime all of the escrow offices I know are working full-tilt to get as many contracts closed today as they humanely can do.
Some of the frustrations that home buyers have experienced are that a large amount of the sales going on today involve either bank owned or short sale transactions - both of which aren’t always following the deadlines put to them in real estate contracts. With short sales taking, on average, around 6 months or more to close these types of transactions have really strangled the buyers who are trying to purchase them, if they were going for the tax credit.
At Team Reba we’ve seen the reality of the concerns that buyers have had with at least one listing having had a contract cancelled due to concerns that the buyer wouldn’t be able to close in time for the tax credit. Now it’s too bad that they did so since the extension is likely here. We also had another contract where we had to push hard on behalf of our buyer because the family was purchasing a bank owned home where the Trustee and the bank were slow to respond on every deadline and request for documentation, taking upwards of 3.5 months to close the deal. We just closed that transaction last week, much to the relief of our clients.
For the rest of you out there waiting to get your closing done today, you might cross your fingers, toes and legs and knock on wood - let’s hope the Senate gets moving on this bill.
Lots of good information comes to us agents via the NWMLS that we belong to and today’s update in their system has alerted us to a new requirement in the City of Tacoma that all of you who own property in Tacoma will want to know about. Read the notice below:
City of Tacoma – Side Sewer Inspection Requirement
Effective July 1, 2010, Tacoma property owners are required to have a certified inspection of their private side sewers prior to the sale or transfer of a home or business, major remodel, or any construction over an existing side sewer. More information about the requirement is available on City of Tacoma’s website. NWMLS has created Form 22 TSA (Tacoma Sewer Addendum) that should be used for the sale of property with a side sewer in the City of Tacoma.
WR Urges Call to Action on Proposed Tax Increase
Please send a message immediately to State House members to stop taxes on real estate. The Senate’s budget increases the B&O .25% on real estate professionals, as well as shifts the real estate excise tax onto the buyer of a foreclosed home. The Senate’s budget passed the Senate and is now being considered in the House.
The message above was sent out to real estate agents who are members of the local multiple listing service along with a link to the site where we could send a message to our representatives. For the general public, I realize that you may not care if real estate professionals are hit with a higher Business & Occupation (B&O) tax, but know that we have the highest rate of such a tax in this state.
The more important issue to the home buying public is the shift of moving the excise tax payment burden from the seller to a buyer of a foreclosed home. All this does is help lessen the costs of banks when selling their foreclosed inventory and it puts a higher cost burden on the buyers, who in many cases for first time buyers are just barely qualifying for the amounts that they’re purchasing in. If excise tax, which runs 1.78% here, is now put on them as a closing cost fee, then that buyer ends up paying the tax twice because they’ll have to pay it again later when they sell the home at whatever that new value will be at that time. Also, it will lessen the amount of home purchasing power that they’ll have, at least when it comes to buying bank owned homes because that will likely be part of the qualifying factors for the lender when they do their underwriting review. If a buyer is qualified at $200k for a traditional purchase but now 1.78% ($3,560 in this case) must be considered, then a buyer may not be able to buy a $199k home because the excise tax payment requirement puts them just out of reach if they originally only needed $7,000 for down payment via FHA (3.5%), PMI payment of roughly the same amount (possibly wrapped into financing) still increasing cost of loan and impacting qualifying factors, and reducing what they might have in their “reserve” accounts which are also factored in for qualifying because most banks want 3-6 months worth of funds available at closing.
If you are in support of not having the excise tax payment shift made to buyers, please contact your State representative immediately!
We’ve been working on a transaction for one of our clients since late October 2009. The client came to us the year prior thinking it would take him 2 months to get ready for on market, but then took 7 months to get there. I’d done a lot of early review of the property to try and determine our chances with FHA since only one part of the complex was initially approved when the development was completed. For those not familiar, if your complex isn’t already approved you can do what is called a “spot approval” with FHA but only IF your building meets certain criteria. At the beginning we were in good shape.
However, late 2009 brought lots of changes in FHA and as most of us agents know the spot approval process was in jeopardy of going away - and that’s exactly the kind of buyer we ended up in contract with so we knew it might be touch and go as we targeted a closing to meet the initial 1st time buyer tax credit deadline. The FHA spot approval cutoff is now pushed to Feb 1st of 2010, but many of the tightening aspects of FHA have been happening along the way to that new deadline. For one, we got hit with this transaction failing at one point because even though we’d had an FHA appraisal completed, we got turned down for spot approval because the association hadn’t yet approved their recent reserve study. FHA was requiring that reserve studies be within the 12 months prior and the last approval of one was from 3 years ago - even though the association had a study in hand, it just hadn’t been approved by the board yet as they continued getting bids for the roofing element.
The buyer’s agent and the lender for this deal have been great about staying diligent with the file and found alternate ways to have the budget review of the association used for the spot approval - and on my end I was coordinating with other listing agents with clients in the complex to have us all pushing support of approving the reserve study. One agent had her client’s lender submitting the entire complex to FHA for approval.
With all of us working in concert with each other we got the wonderful news on Friday that our approval from FHA was accepted! Not just for my client’s spot approval, but the entire complex will now be approved. YEAH! Now, we are back on track for closing - 2 months later than expected - but closing nonetheless. All the selling clients involved are very relieved and the buyers are all starting to get excited about their purchases again. It’s a new day and time in real estate, and those of us with the nerves of steel and willingness to work hard, and together, to overcome the obstacles that arise for our clients it is very worthwhile.
Much like the folks in King County, there are days in Snohomish where the recording office is closed. This will affect the closing of any real property transfers, sales, and refinances. Below are the dates affected:
January 1st - New Year’s Day, January 18th - MLK Day
February 15th - President’s Day
May 31st - Memorial Day
July 5th - Independence Day
September 6th - Labor Day
November 11th - Veteran’s Day, November 25/26 - Thanksgiving
December 24th - Christmas
In order of the calendar:
Jan 1 - New Year’s, Jan 18th - MLK Day
Feb 15 - President’s Day
May 31st - Memorial Day
July 5th - Independence Day
September 6th - Labor Day
November 11th - Veteran’s Day, November 25th/26th - Thanksgiving
December 24th - Christmas, December 31st - New Year’s Eve
If you’ll be buying or selling property in King County throughout this year, it might be good to put these dates on your calendar so you don’t inadvertently put the closing date of a contract on the wrong day and have an automatic bump to the next business day. Also, these dates are announced without King County having put in any furlough days, as they did in 2009. If budget issues arise, you might expect to see that again as those were instituted and then updated not necessarily at the beginning at the calendar year in 2009. So, for 2010 keep your eyes open for any possible changes. Next up…. Snohomish County recording office closure dates.
Well, a huge and collective sigh of relief for a lot of homeowners and wannabe homeowners has been let out this week with the passage of the tax credit extension. The big bonus is that there is an expanded package available and so to keep you all abreast of the new changes, here is a link to a chart that spells out all the new details.
For those that weren’t aware of it, the expansion part includes a new $6500 tax credit for purchasers who are moving into a different property (must be $800,000 or less) and who have lived in their current home for at least 5 consecutive years out of the past 8 years. This means current homeowners who may have been sitting on the sidelines wishing there was more in it for them to sell now and move into a new place (move up or downsizing, or just getting into a new neighborhood), there are some incentives to go along with the lower prices now available. Be sure to read all the provisions and limitations because the tax credits do also have income limitations and phase out rules.
Everyone has been waiting with baited breath to hear what will happen with the 1st time homebuyer tax credit that currently has a deadline of November 30th for closings in 2009. Congress passed the extension as of last Wednesday and now the Senate is considering it. Today, an article from REALTOR.com notes that key lawmakers have tentatively agreed to not only the extension through April (to get under contract) but to also put a new element in for buyers who have owned and lived in a home for 5 consecutive out of the past 8 years. Tax credit available to these buyers will be $6,500 but does have some maximum income limitations and/or phase out details that you’ll need to check out for your own personal situation.
A couple of days ago, I wrote an article that highlighted issues in King County, WA regarding closings in November 2009 that could impact a buyer’s ability to get the $8,000 tax credit for 1st time buyers. More news is coming out that impacts this as well and buyers should be prepared that lenders are wary of the volume that will hit at the end of this month as well and they’re putting up barriers for any legal action that may come from a rush of paperwork and deadlines culminating at the end of the month during one of our Nation’s biggest holidays.
See below for a warning sent out by one of my lending contacts with regard to news they’re being given of banks trying to reduce liability for missing the deadline. Be sure to be talking to your lender about their policies and volume that is expected for this month. The last day of the month is a Monday:
One major lender has reminded us that, for the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the homeowner. This must take place before December 1, 2009. This lender is also suggesting that a disclaimer be signed absolving them of any liability should the mortgage loan not get closed in time for the credit. There is a movement to extend the deadline at least 6 months, and even to drop the first time buyer requirement. Who knows what the future of that is. Good Luck Jerry Rutherford Professional Mortgage, Inc.
22659 Pacific Hwy So Suite 101
Des Moines, WA 98198
Phone: (206) 870-5050 Cell: (206) 356-1711
Toll Free: 1-800 764-5626 Fax: (206) 870-5051
Email: jrutherford@pmiloans.com
www.pmiloans.com
WA Lic. # 510-LO-35158
