Pest Report Repairs – Licensed Contractors Required?

Hello Neighbors,

In California, the short answer... Nope!

With regard to repairs, licensed contractors aren’t required: Take a look at the text in the actual pest inspection report on page 2. It says “OWNER SHOULD BE AWARE OF THIS CLOSED BID WHEN CONTRACTING WITH OTHERS OR UNDERTAKING THE WORK HIMSELF / HERSELF”.

TONS of information can be pulled from the California Pest Control Board’s website at: http://www.pestboard.ca.gov/ One of their documents is 152 pages long, another is 600 pages! Look for their 12 page booklet from the State of California which has a bunch of Q & A on pest requirements.

This particular issue hit me hard when I sold my own house (before getting into this business).

My Realtor at the time (the same agent who didn’t tell me about Supplemental Property Taxes) told me that a licensed contractor had to do the pest repairs, and that it HAD to be the same company who did the inspection.

I found out later – once I took the “Legal Aspects of Real Estate” course for my broker’s license - that wasn’t true. Anyone can do the repairs. Most of the time when representing a Seller, we have the Seller do their own repairs. Once the repairs are complete, you should have the original pest company come back out for a “re-inspect”, but even that isn’t legally required!

I even did one repair for a client in May of this year. They were having a baby, and couldn’t get to the last repair. So I helped them out.

So be aware – when working with pest inspection companies and vendors. It is part of the process to have them bid for the repair work. Their bids were reasonable…. before this current economic crisis. Now we are seeing some outrageously high bids from these same companies. They too are hurting, and need to generate revenue just like any other business.

- Jim

www.NeighborlyRealty.com

Are Pest Reports Legally Required?

Hello Neighbors,

In California, the short answer... Nope!

Would we want a client to move forward with a purchase or sale without one? NO!

A pest report isn’t a legal requirement at all for the State of California! Nope. It’s a lender requirement (90% of the time), or something us agent’s order simply so our clients have some protection / piece of mind.

TONS of information can be pulled from the California Pest Control Board’s website at: http://www.pestboard.ca.gov/ One of their documents is 152 pages long, another is 600 pages! Look for their 12 page booklet from the State of California which has a bunch of Q & A on pest requirements.

It says directly in the State of California materials (in the web site noted above): “Most lending institutions require that homes in California be inspected for wood destroying pests and organisms (WDO) before financing a home loan.” – it’s absolutely true of VA loans for example. But we have had loans go through (where we’ve been representing the Buyer) where a pest report wasn’t even required.

Of course, we nearly always have our client get a pest report. It’s common sense. In most bank transactions, a Buyer takes the home “as is”. It’s extraordinarily rare for a bank to supply any reports and do any repairs. However, we need to know what we are getting in to. A pest report gives us a quick glance at potentially expensive issues. Pest reports are usually between $85 - $125, and that’s cheap insurance for piece of mind.

In a “standard” family to family transaction, the Seller will likely order and pay for the pest report. In a Short Sale transaction, it’s anyone’s guess. In a REO (foreclosed, bank owned) transaction, the Buyer will probably have to order and pay for the inspection themselves.

- Jim

www.NeighborlyRealty.com

Good Homes are Still Selling - and Near List Price

Hello Neighbors,

A client called today and asked about placing an offer on a bank owned home. Of course, this is a standard call we get daily... but this time I pulled a bit more data to apply to this particular offer.

Good homes are still selling. The majority of them are bank owned. ...and, most are selling at list price or above.

I have one bank-owned home in escrow now in Nevada County. Our offer was at list price ($319,000), and so were the two other offers we were competing against. I closed one a few weeks ago for client in Antelope. That one was also at list price ($211,000).

Two of our agents (Kevin and Peter) just closed a total of 4 sales:

List prices for those were: $142,900, $178,000 $151,748, and $272,900

The corresponding sale prices were $150,000, $197,500 $140,148, and $272,900.

2 sold above list price, 1 sold below list price, and 1 sold directly at list price.

I am submitting an offer tonight on a home in Marysville with a list price of $157,000. Our offer is at the list price $157,000.

What does this say?

We all have the neighbor / friend / co-worker who "bought a house at 40% of list price" or "got a steal on a foreclosed home"... but if you look at the data? The banks have been pricing homes at near fair market value, and they are getting it.

- Jim

www.NeighborlyRealty.com

Our Sympathies

Hello Neighbors,

The ordeal in India from the last few days is over, but there is much healing to be done.

We want to extend our sympathies to those Indian families who were impacted.

This event holds special relevance to us. I stayed at the Oberoi Hotel in Mumbai several years ago. The hotel was stunning. The staff was amazingly friendly and helpful. Whenever you walked by, they stopped what they were doing to say hello. Amazingly too, they all knew your name... "Hello Mr. Harris". It didn't matter if they were working the front desks, or cleaning a room. The entire staff knew.

I was there on Hewlett-Packard business at the time. Jenny followed me a few years later (also for HP) and stayed at the Taj Hotel. Ironically, those were the two hotels attacked.

Jenny and I were saddened by these events, and the loss of the Oberoi and Taj staff. We wish those families our best.

We were glad to learn that the Indian families we work with locally (to help them with their Real Estate needs) weren't impacted.

Take care everyone, and look out for your Neighbors,

- Jim
www.NeighborlyRealty.com

Slowest Time of the Year - Best Deals to be Made

Hello again Neighbors,

We are entering the slowest time of the year in this business - the Holiday Season.

November and December are traditionally very slow.

BUYERS - THIS IS ALSO THE BEST TIME TO NEGOTIATE WITH SELLERS.

If you want to buy a home, this is the season to try - and try hard. Last year I saved a family over $120,000 on new construction. The builders are trying to close out their year and get rid of "standing inventory" (complete or nearly complete homes that are just sitting). It's those we go after.

We go in wheeling and dealing, and often time wind up with smokingly good results (for the Buyers). It's the worst time of the year to Sell, but if you are curious about Selling - call me.

As December is the slowest time - January starts an entirely new "land rush" season!

Happy Holidays,

- Jim

www.NeighborlyRealty.com

Emergency Rate Cut by the Fed !

Yep!

...and it is impacting mortgage rates (loans) directly this time!

I got an update yesterday from our credit union pals - 5.625% for 30 year fixed at NO points !!! 5.375% on a 15 year fixed at NO points !!!

Stunning!

We are nearing the lowest point in history again.

Here's a blurb from another lender friend:

The Federal Reserve and Federal Home Loan Banks announced that they would purchase up to $600 billion in Mortgage-Backed Securities (MBS), exciting news that sent interest rates for 30-year fixed-rate mortgages plummeting below 6.00% and near the lows for the year!

Is now the time to Buy?

Watch for the next blog post!

- Jim

www.NeighborlyRealty.com

Happy Thanksgiving !!

Hello Neighbors,

Just a quick note to say Happy Thanksgiving.

May all of you have a wonderful time with family and friends. Relax. Enjoy some down time, and focus on what is important.

At Neighborly, our families wish you and yours the best!

- Jim

www.NeighborlyRealty.com

Working in This Business - A Student's Questions

I had a fun email exchange today. A student from CSU Sacramento sent me a list of 11 questions about this business. She is the daughter of a fellow Realtor as well.

I remember conducting such surveys when I was a wee tot. It's fun to be on the other side now, so I thought I would share the exchange.

Here you go:

1. Exactly what does your job entail (specifics on what you do)?

I am the owner and managing broker of Neighborly Realty. I manage real estate agents, set business policy, implement business strategy, and get to help my own clients (buyers and sellers) with their housing needs. I am launching another business right now too, called “Neighborly Financial”.

2. What are the educational requirements for this position?

I think it can be done with a high school education, 8 real estate specific classes, and the passing of two California state tests (Real Estate sales person and Real Estate broker’s exams). You need to be a broker before you can run your own “shop”. My own education is far beyond this. I have a BS from Chico State and an MBA from UC Davis. Both degrees are in Business Administration, with a focus in Technology.

3. What experience is required or recommended?

Nothing is really required (which is why this industry is having so many deep deep problems). Recommended? Wow. I could go on for hours on this topic. Most important points though:

a) You have to be genuinely concerned about people. If you don’t have other’s interests at the top of your list, you shouldn’t be in this job

b) You have to think long term. Where is your business going to come from in a year? If you don’t think this way, you won’t survive. You can’t just live pay check to pay check.

c) You need to be technology enabled. If you aren’t keeping up with communication trends (texting, blogging, etc.) you are going to miss out on the new folks entering the market.

4. What do you like most about the position? Like least?

Most: I get to make the decisions that I think are the best for my clients and staff.

Least: The hours. As your dad knows, we are working 7 days a week right now. Also, the lack of professional people in the business. There are some real slugs out there, and you have to be careful (for your own business, and for your clients).

5. If you could start over, would you choose the same career? Why or why not?

Yes. But I would have done it much earlier. I spent 18 years total with IBM, Hewlett Packard, and Agilent Technologies – before making the full time leap into this industry. Those experiences gave me skills that are miles beyond my peers, but I should have made the leap earlier.

6. What problems could I expect to encounter in a position of this type?

Evolving regulatory change as we recover from this current disaster. Legal challenges from unknown directions. A tough time finding good people to work with, and to work for. Tightening lending markets. Keeping your own “pipeline” full (with clients who need help in the future).

7. What future changes do you see in this field?

More regulation. Continued reduction of those agents who are just “in it for the money”. Consolidation as some of the smaller brokerages and companies merge (to survive financially). More foreclosed homes and short sales.

8. Describe the ideal person for this career.

Professional. Dedicated to helping others. Skilled communicator with good follow through skills. Someone who has a niche and can build a business based on that niche (like your dad’s language skills giving him unique access to other Philippinos – that is a networking angle he really needs to build).

9. What is the average salary for a person just starting out in this career?

Yikes. I have no idea as it is 100% commission based. In this market where times are so difficult? Perhaps $30,000 a year? A good agent, with good business skills, good coaching, and a good mentor should be earning more than that.

10. What questions could I expect if I were interviewing for a job of this type?

Style questions really. Communication skills. Fit with the exiting team / brokerage. It depends who you interview with. Most brokers are in it for the money – so they will ask you about your “referral database” business. We aren’t though, so we interview for style, fit, and genuine care for other people.

11. What professional organizations (journals, newsletters) do you recommend?

A local association membership (like the Placer County Association of Realtors or the Sacramento Association of Realtors). LOTS of web site reading with the California Association of Realtors and the National Association of Realtors. Read our blog too!

Kinda fun.

- Jim

Please Vote !! - Need a Ride?

Hello Neighbors!

Just a reminder to get out there and vote tomorrow!

If you need a ride, give us a call. Depending on need, we'll do our best to help you out. That's what neighbors do.

Good luck!

- Jim

You've Asked - We Will Deliver !

You wanted Neighborly to do loans?

Watch this space for updates!

We'll have that capability in 2009 - including FHA !

Coming soon...

- Jim

Clients Challenging Our Wages

Unfortunate.

After working for 7.5 months with a family, submitting 11 offers for them on Short Sales and Bank Owned (REO) property (we have verbal acceptance on one), doing more pre-negotiation work with new construction...

We receive an email demanding we pay them roughly 33% of our wages!

These are Buyer clinets as well. We already work for free for Buyers!

So? Free + Agents or Brokers paying client to use us? That would be a wonderful "program" to offer, but it isn't a realistic expectation.


Of course all real estate commissions are negotiable. Some real estate firms offer "incentives" back to a Buyer client if they use them. But that is not the norm. In fact, it's a very small percentage of companies. Usually it is a bulk service provider more interested in high client turnover than service. They make their revenues through volume. They don't encourage referrals, so they don't often do the very best for their clients.

In our business everyone comes after our wages. On a Short Sale home, the lender almost always cuts commissions. On a bank owned home (REO), the banks frequently cut commissions. Those two classes alone count for a little over 60% of the homes on the market today.

Now the client wants a chunk of our reduced wages too? I do enjoy charity work, but I can't buy food with only my good looks.


There is a view that Realtors make piles of money. I believe this could be true for some (I haven't met them personally). But again, it's not the norm. Of the 1.4 million members in the National Association of Realtors - over 400,000 had zero or one transaction in the last 12 months. Try surviving on that.

This is an expensive business to run.

Earlier in the year I spent nearly $2,000 listing and advertising a home for sale - that we eventually removed from the market.

We are all independent contractors or business people. In addition to high fuel prices, we have to provide our own:

* If you are an Agent, you pay your Broker a percentage of all your earnings
* Errors & Ommissions insurance policies (MANY thousands of dollars)
* Workers Compensation insurance policies (also very expensive)
* Enhanced vehicle insurance policies
* Office space leases (over a thousand dollars a month)
* Rental insurance policies for leased space
* Telecom & IT support expenses, and new equipment purchases
* Websites and email engine expenses
* MLS dues (some of us pay over a thousand dollars a year)
* Local Association Membership (several hundred)
* State Association Membership (several hundred)
* National Association Membership (several hundred)
* Medical, Dental, Vision insurance ($1300+ month for a 4 person family)
* Fees for Formal Education requirements
* Fees for Licensing and renewal
* Fees for Additional checking / savings account so as not to co-mingle funds
* Fees for contracts software
* Tax rates that are unbelievable for the self-employed
* Expenses for our street signs and open house signs
* Additional clothing expenses
* Expenses for all of our own office supplies, fax machines, printers, toner, business cards, periodicals to stay up to date, etc.
* We may even have to buy a new chair to sit in, to type up your contracts (and the coffee to keep us running)!

...and we haven't even started counting the expenses associated with marketing your home or the business.

Personally, my wages were higher with my corporate job, and I only worked 50 or 60 hours a week.

Now? Those of us who are surviving and doing well are working 7 days a week, and nearly constantly. Yep. You don’t measure the work day in hours. If you are awake? You are working.


Of course, none of the items listed above are really the consumer’s (or client’s) concern. They shouldn’t be. It’s our job to run as efficient of a shop as we can. That’s part of the risk / reward of working for yourself.

But – when we are working for you for free, and you are asking for our wages as well? Please give a thought or two to that request.

Perhaps you will understand when we say “No thank you, but I can refer you to someone who might…..”

I encourage our agents to fire clients. That's right. In this market of insanity and challenge, if a client isn't performing or is unethical? Our folks can end that relationship immediately. I'm told that's rare for a broker, but that's the way any professional organization should operate. We aren't in it for the dollars. We're in it to do the right thing. Our clients should be too.

Buying a home in this market requires a very close partnership between family (Buyer) and service provider (agent). When getting into this professional relationshp, make sure you've got the right partner by your side.

- Jim

Amazing Times….. TO BUY

Amazing times. Stunning.

The country of Iceland possibly going under.

US and European governments jumping in to “free markets” with both feet.

The Dow finishing down another 7% today. (I personally believe the S&P 500 is a more relevant metric than the Dow, and it was down more than 7.6%).

Some talking about China as a potential lender to the world… China !

Wow.

What does it all mean?

…..I will ask Bobby when he arrives on Tuesday.

Bobby is flying down from Canada to look at property near Sac State . He’s looking for a deal on investment property that he will turn into rentals. Jeff and I are going to take him out and help him with this quest.

If a family from Canada thinks it’s time to buy real estate in our area… and if the other dozen or so families we are working with are also charging ahead full blast… perhaps the macro-economic environment isn’t as crushing locally as the media suggests?

Sure – just like all of you, my 401k is 6 feet under. But Warren Buffett (a personal hero) has a saying: “When people get greedy, it’s time to go (sell). When people are running in a panic, it’s time to jump (buy)”. I believe Warren . I practice what he preaches. The other day when the Dow lost 777 points? I bought stock. I wish I had the funds to do it again today.

I genuinely believe the same is true in today’s real estate markets. If you can buy, consider it.

The New “Resolution Trust Corporation”?

In our January 2008 newsletter we mentioned an entity from the past called the “Resolution Trust Corporation”.



We also mentioned that entity in a few blog posts in the Spring and Summer.



Well, the government folks are now starting to talk along the same lines. History is destined to repeat itself.



Although they are at a very high level when talking about this model, there will likely be some fundamental differences.



The RTC was created to bail out the S&Ls who went under in the 1980s. They bought hard assets (apartment complexes, commercial buildings, etc) whereas this round seems to be targeted on paper assets (the bad mortgages, credit swap instruments, etc.).



A few of our business partners were able to take advantage of the RTC fire sale prices, buying apartment complexes for pennies on the dollar. We missed those opportunities, but hope to be in on this next round.



How? We aren’t sure yet… but stay tuned. If we can figure it out, we’ll share the knowledge with you.

BUYERS - Jump !!

Hello Neighbors,

WOW. I just had a great conversation with a lender friend.

The fallout from the Freddie Mac / Fannie Mae bail-out?

In his rate sheets, his quotes were coming in at the largest single day drop in mortgage rates that he has seen in 14 years !!

Outstanding!

If you are on the fence, this might be another reason to jump in.

If you aren't familiar with the term "rate sheets" and how loan officers get their rates, give me a call. I'm not in loans, but I will be happy to try and explain.

Thanks again,

- Jim

Fannie Mae & Freddie Mac to be Bailed-Out

Hello Neighbors,

Regardless of your political views, laissez-faire beliefs, "smaller government" political parties paying the largest in bail-out dollars ever, and such... Well.... this had to come.

Below is an article from Reuters on the bail out of Freddie and Fannie.

These organizations have always been a puzzle. They are partially government owned / controlled already (at least that's the perception), so how does a "bail out" really change things?

Again - perception. It's what this industry is all about, and economics in general.

When we first heard this news yesterday, my wife and I booted up our laptops to check on how Asia's stock markets were trading. Would the news be taken as a sign of armageddon, or would trading carry on as normal? Neither as it turns out. Instead, the Asian markets rallied - as ours then did this morning.

We'll see how this all ends up. None of it really matters though until we get through the election. Election years in the US are notoriously and traditionally volatile (in the financial markets).

Here's the Reuters article:


U.S. seizes Fannie, Freddie, aims to calm markets
Sun Sep 07 23:25:54 UTC 2008

By Glenn Somerville

WASHINGTON (Reuters) - The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae and Freddie Mac, launching what could be its biggest federal bailout ever, in a bid to support the U.S. housing market and ward off more global financial market turbulence.

Officials were concerned mounting losses at the two companies, which own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt, was sapping their vitality and threatening to undermine them at a time other sources of housing finance have largely run dry.

"Our economy and our markets will not recover until the bulk of this housing correction is behind us," U.S. Treasury Secretary Henry Paulson said at a news conference. "Fannie Mae and Freddie Mac are critical to turning the corner on housing."

The two companies, publicly traded but also serving a government mission to support housing, were put in a conservatorship that allows their stock to keep trading but puts common shareholders last in any claims.

Their top executives were ousted. Freddie Mac chief executive Richard Syron and Fannie Mae's CEO, Daniel Mudd, were replaced by David Moffett, a former top official at US Bancorp and Herb Allison, formerly with Merrill Lynch and pension fund TIAA-CREF.

In addition, the U.S. Treasury will immediately take a $1 billion equity stake in each company in the form of senior preferred stock and if needed could inject up to $100 billion into each firm.

The government's senior preferreds stock would rank above both existing preferred and common shares and will carry warrants that could give the government an ownership stake of 79.9 percent.

Treasury also set up a program under which it would buy mortgage-backed securities currently held by Fannie Mae and Freddie Mac to pump fresh funds into the mortgage market. It said it would begin buying MBS later this month, and it would have authority to make such purchases through December 31, 2009.

Paulson said Fannie Mae and Freddie Mac were so large that "a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."

Several analysts said the move should help instill some confidence in shaky credit markets and lower mortgage costs.

"The government had to do something to eliminate uncertainty," said Peter Goldman, a principal with Front Barnett Associates in Chicago. "Anything that eliminates uncertainty in the credit markets is a good thing."

The Treasury Department said the plan to shore up the finances of the two government-sponsored enterprises, which have $1.6 trillion in debt outstanding, should not cost U.S. taxpayers money in the long run and could even return cash to the government coffers eventually.

The companies have suffered combined losses of nearly $14 billion in the last four quarters and large holders of their debt, including overseas central banks, have begun to show signs of increasing nervousness over their financial health.

Worries over their shrinking capital position led their regulator, the Federal Housing Finance Agency, to place them in conservatorship.

"As house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated," FHFA Director James Lockhart told the news conference. "They have been unable to provide needed stability to the market."

He said the companies lacked sufficient capital to continue taking losses while supporting the housing market at the same time.

Federal Reserve Chairman Ben Bernanke said in a statement that he "strongly" endorsed the action. "These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," he said.

As part of the plan, FHFA will operate the companies until they are stabilized and the Treasury will extend financing to the companies, as well as to the Federal Home Loan Banks, through a new lending facility until December 31, 2009, if needed.

In addition to the senior preferred stake Treasury is taking in the companies, it will immediately receive warrants for the purchase of some common stock.

The stock of the two companies has fallen more than 90 percent in the past year and in recent months foreign investors have pared their holdings of the companies' securities.

Paulson had briefed both Democratic presidential nominee Sen. Barack Obama and Republican contender Sen. John McCain earlier in the weekend. Both candidates indicated they would support the plan, but wanted to ensure taxpayers were safeguarded and shareholders and management took a hit.

Thanks Reuters,

- Jim

Northern California Professionals Group

Hello Neighbors,

Exciting times indeed. Many of you have used our partners for your needs that are tangent to the real estate (home owners insurance, a CPA, Financial Advisor, etc.) business.

We co-host a group called the "Northern California Professionals Group" which is the combined team with people from these complimentary businesses.

Finally (after a little over 2 years) we are getting our act together! We are producing a formal website that will let you see who the extended team is. All of the contact information for our peers will be available from this website.

The URL is: www.NorCalProGroup.com ...but beware, it's just getting off the ground. It will be thin on content until the beginning of October.

Stay tuned though, as this group is very important to Neighborly Realty. The group is made up of professionals who are in business for the right reasons - to serve. They are trustworthy and reliable partners. They are folks who do business like we do business, for the right reasons...

Many thanks, and keep your eyes on the new web site!

- Jim

4 More at Neighborly Realty to Better Serve You !!

Hello Neighbors,

Sorry (again) for the delay in blog updates.

It's been an exciting and wild couple of weeks.

Neighborly Realty is now a team of 8 - yes, 8 !!!

As many of you know, we are a different kind of real estate shop. We aren't in this for the "big bucks". We are in this to do the right thing for our clients, their families, and investors who need a helping hand.

Well, the momentum behind this vision has become overwhelming! Not only are our phones ringing off the hook with clients who want help - but a few agents have also jumped in to practice the Neighborly Way.

We are very pleased to announce that Jeff Engle and Peter Bond have signed up! They are practicing Realtors who like the Neighborly way of doing business and treating people.

How are we handling this growth at a time when the industry is hurting? We've brought in even more help!

A young lady named Jamie has joined us as a coach, training specialist, and mentor. A young man named John has also joined and will be helping us develop a formal Office Manager position.

The end result to you?

Darn good service.

Welcome Jeff, Peter, Jamie, and John to the Neighborly Team!!

- Jim

Neighborly Realty Adds One !!

Hello friends of Neighborly Realty,

This is an exciting post for me to type out... 5 years in the making.

Neighborly Realty has added another agent - the lovely and talented Jennifer Harris !!

Welcome to the team Jenny!

Jenny has 10 years of professional experience with Hewlett-Packard, and 4 years of experience with a design firm that used to setup model homes for builders. She absolutely knows how to stage a home for a Seller !!

Oh yeah, and she's my (Jim's) wonderful wife.

Woooo Whooooo!

- Jim

$7500 "Loan" from the IRS? Yes

...but you have to pay it back over a 15 year period.

To follow up my last post with this post seems odd.

As you know, we run a small group of like minded professionals in businesses that compliment Real Estate. The goal is to provide you with expert service providers in different fields so that you can trust who you are working with.

This note just in from our CPA (Certified Public Accountant) named Jeremy Stead. He's sharp, and keeps an eye on those things that impact my clients. Let me know if you would like his contact information.

An update on the new legislation passed this week:

**************
American Housing Rescue and Foreclosure Prevention Act of 2008

On July 26, 2008, Congress passed the American Housing Rescue and Foreclosure Prevention Act of 2008. President Bush signed the measure into law on July 30.

The legislation, H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act, would help stem the tide of foreclosures, stabilize local housing markets and provide incentives for first-time homebuyers. Chairman Rangel, a longtime advocate and leader for improved access to low-income housing was the author of the tax provisions contained in the bill.

“This bill received strong bipartisan support because it is the right thing to do for our country during this economic downturn,” said Chairman Rangel. “Provisions in this bill represent the most significant expansion and improvement of tax programs designed to provide affordable housing for low and moderate-income individuals since the inception of the low-income housing tax credit in 1986.”

“First, the bill would expand and improve the low-income housing tax credit, which is the largest source of federal support for the construction and rehabilitation of affordable housing,” continued Rangel. “Second, the bill increases volume limits on housing bonds to finance low-income rental housing and first-time homebuyers, while also providing states with greater flexibility on how to use those bonds efficiently. These improvements will go a long way to address the shortage of affordable housing options in our cities and towns.”

The Low-Income Housing Tax Credit (LIHTC) has been responsible for the development of over 2 million rental units across the nation since its inception in 1986.

The LIHTC is the most successful, longest running Federal program for supporting the development of affordable rental housing.

Included in the package is a ten percent increase in the credits allocated among states, and an $11 billion increase in tax exempt bond authority to support single family and rental housing, as well as many changes in the tax code to make the use of the LIHTC more efficient. Housing advocates agree these changes will result in additional units of housing and, especially, more units for lower-income families.

Also included in the package is a provision to enable cities and towns to more efficiently use tax-exempt bonds in the effort to develop affordable rental housing. The provisions will enable New York City to issue significantly more bonds so that it can support the development of thousands more rental units for low-and moderate-income families.

Below are the main tax provisions included in H.R. 3221:

First-time homebuyer tax credit to assist in making a down payment on a home. This would provide individuals and families with a refundable credit (equivalent to an interest-free loan) of ten percent of the purchase price of their home (up to $7,500). Taxpayers would be required to repay any amount received under this provision to the government over 15 years in equal installments. The credit is phased out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).

Additional standard deduction for real property taxes to help homeowners who claim the standard deduction by allowing them to claim an additional standard deduction of up to $500 ($1,000 for joint filers) for State and local real property taxes. This provision applies for tax year 2008.

Temporary increase in low-income housing tax credit and simplification of the credit. The bill would increase the current limit of the credit from $2.00 for each person residing in a state by an additional ten percent. This will help put builders to work to create new options for families seeking affordable housing alternatives. The credit will also be simplified to improve its effectiveness.

Temporary increase in mortgage revenue bonds The bill would also allow for the issuance of an additional $11 billion of tax-exempt bonds to refinance sub-prime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.

This legislation is supported by a broad group of advocates for affordable housing.
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Of course, CONSULT YOUR CPA if you have questions about this. I can't legally advise on tax issues, so please do talk to the right people.

Many thanks to Jeremy Stead for getting this data to us - and to you!

- Jim

Down Payment Assistance Programs - ACT BY OCT 1st

This news IS important.

Over the last year, 17% of all home purchases by first time buyers were made with down payment assistance programs.

The most noteworthy is the "Nehemiah" program. That program has been in the press for months, and the industry has been buzzing about it's rumored end. It looks like that is happening.

I just got this note from a colleague who works for that organization:

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Dear Jim,

This week the President signed H.R. 3221, Housing and Economic Recovery Act of 2008, into law. The bill contains a provision (SEC. 2113) which forbids FHA from insuring mortgages in which the borrower’s down payment comes from a private down payment assistance provider, beginning October 1, 2008. As of this date, the minimum down payment will be increased from 3% to 3.5%.

The consequences will be devastating! By FHA's own estimates, DPA (Down Payment Assistance) comprises nearly 40% of FHA's volume. This means more than 300,000 working class families will be locked out of homeownership in the next year alone. Communities across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed tens of thousands of jobs due to this dangerous legislation.

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It sounds a little dramatic, which is fine. They need people in my business to take action to try and save these Down Payment Assistance programs.

The reality is tough - if a first time buyer is going to buy a home using down payment assistance THEY MUST CLOSE ESCROW BY OCTOBER 1ST. If their escrow closes on October 2nd? They are out of luck. The dollars will not be available.

What does this mean?

If you want to buy, and you were planning on getting 3rd party down payment help to cover a shortage of your own funds - we need to act quickly.

I'm not a salesman, you all know that by now. However, this may be one time when conveying a "sense of urgency" is necessary. Call me and let's get going!

- Jim