Some home buyers in California could get a federal tax credit worth up to $8,000 plus a new state credit worth up to $10,000 if they time their purchase just right over the next three months. But double-dipping will be tricky and won’t come without risks.

One couple who lucked out are Sibel Demirmen and Scott Henry of San Francisco, who are purchasing a home, their first, in San Rafael’s Terra Linda neighborhood.

They were planning to close escrow on April 30, and knew they qualified for an $8,000 federal home-buyer tax credit.

To get the federal credit, buyers must – among other things – close before May 1 or enter into a binding contract before May 1 and close before July 1.

Last weekend, they learned that if they could delay their close until after April 30, they could also qualify for the new California home-buyer tax credit, which was signed into law last week. The state credit is worth up to $10,000, spread over three years.

The seller agreed, and on Monday they signed an addendum to their contract postponing the closing until May 4.

“I was elated. I was ecstatic. I was thrilled,” says Demirmen, a singer, music teacher and mother of two.

Although the prospect of double-dipping will excite many house hunters, “I don’t think a ton of buyers will get both and benefit from both credits,” says Renee Rodda, editor of Spidell’s California Taxletter.

To get both, buyers must meet two sets of strict criteria. Timing it right will be tricky, especially in foreclosure or short sales, which can involve long lead times and many parties.

People who have already locked in a rate on a mortgage could lose the rate, or have to pay an additional fee to keep it, if they postpone their closing.

Matt Duffy is buying a home with his wife in Santa Rosa in a short sale, in which the purchase price is less than the debt on the home.

The seller accepted their offer in January. Last week, they heard that both lenders agreed to the deal as long as it closes by April 26.

“We said, ‘Cool, we can do that.’ We have our mortgage and the federal tax credit,” he says.

After reading my Sunday column on the state credit, Duffy realized he could get that too if he delayed his close.

“As it turns out, we are not going to be able to do that. The second lender is demanding we close by April 26 or somebody has to pay an additional $20,000,” he says.

“I am of course upset we can’t move the date. But we don’t want to lose the house. We will still get the federal credit, which is the better of the two credits.”

The federal credit: The federal credit is 10 percent of the purchase price, up to a maximum credit of $8,000 for first-time home buyers or $6,500 for longtime homeowners who buy a replacement home. Either type of buyer can purchase a new or existing home.

Buyers claim the federal credit when they file their tax return (or amend the prior year’s return). This credit is refundable: The full amount will be paid out, even if you have zero federal tax liability or the credit is bigger than your federal tax.

You cannot get the federal credit if your income is too high or the home was purchased after Nov. 6, 2009, and cost more than $800,000.

The state credit: The California credit is the lesser of 5 percent of the purchase price or $10,000. First-time buyers can purchase a new or existing home but repeat buyers can only purchase a new home that has never been occupied.

The California credit is spread over three years, up to $3,333 per year. It is not refundable: If you owe less than $3,333 in one (or more) of those years, you lose the difference that year. Even if you owed $3,333 before you owned a house, you might owe less after because of all the new tax deductions.

The state credit has no income or purchase-price limits. But here’s the rub: Some buyers who fall below the income limits for the federal credit might not owe enough California tax to get the full benefit of the state credit.

To get the California credit, you must close escrow between May 1 and either Dec. 31 or whenever the money set aside for the program runs out, whichever comes first. The money is likely to run out long before Dec. 31.

Alternatively, you can reserve a state credit for new construction by entering into a binding contract between May 1 and Dec. 31 and closing before Aug. 1, 2011. People who do this won’t get the federal credit because they entered a contract after April 30.

Getting both: Both credits require you to buy the home as your primary residence. Both define a first-time buyer as someone who has not owned a home in the three years prior to purchase.

In short, to get both credits you must be in contract on or before April 30 and close between May 1 and June 30 – and meet all other requirements.

Buyers who are already in contract and want to postpone their closing need to get the seller and lender to agree.

“Sellers might be flexible because it’s still a buyer’s market, but they may want something in return,” says Richard Redmond, a mortgage broker in Larkspur.

“If you have a loan locked in with a close date in April and you want to extend it, you may have to pay a fee or get a higher interest rate,” Redmond adds.

Buyers should consult a well-informed tax person and make sure they understand both credits.

This article appeared on page D – 1 of the San Francisco Chronicle

Del Mar CA is an extraordinarily beautiful place to live, with its coastal sandstone bluffs,  majestic old growth Torrey Pines and spectacular ocean views.  We who live or work here are thankful for all these things.  For me, coming to the office, located in the heart of Del Mar Village, is truly a treat!  I get to enjoy dazzling sunsets every day.  

Hiking in Del Mar CA

Cleaning up the Ocean Views

Well, for many Del Mar residents, the ocean views are about to get even better.  A very long time in the planning stages, the Utility Undergrounding Packetis finally underway.  The plan includes replacing overhead wires, poles and transformers with new underground utilities in Del Mar neighborhoods, improving upon views that people are already willing to pay millions for.   The project, partially paid for by parcel assessments, will enhance both safety and community aesthetics.

Undergrounding of the Powerlines – A Good Thing or an Undue Burden?

The problem is, this is not a clear cut issue – while it sounds like a good thing, a project that in the end will greatly enhance the look of the community and boost property values, it poses a real financial burden for some, particularly longer time residents who may not have the means for such improvements.  As Art Olson explains in his article in DelMarSandpiper.org, this debate highlights “a financial chasm between long-time residents, many of whom bought modestly priced homes and are now retired, living on fixed incomes, and newer residents who have invested more into their Del Mar home purchases, and appear less concerned about the financial impact of their proposed assessments”. 

Undergrounding powerlines - two sides of the same coin

I understand the views on both sides. It will be interesting to see how this issue unfolds.  Hopefully, some kind of compromise will be reached will allow the undergrounding to proceed without placing an undue burden on residents and pushing them to the brink of financial ruin…

At a recent conference hosted by NSDCAR (North San Diego County Association of Realtors), John Tuccillo, a former Chief Economist for the National Association of Realtors, George Chamberlin, Executive Director of The Daily Transcript, and several other renown experts, all seemed to agree – we hit bottom sometime around March of 2009.  This graph from statistics gathered by NSDCAR shows the median prices starting to rise again after a steady two year decline. 

Of course, each niche varies and has its own specific statistics – some markets are still declining and some are going gangbusters – but overall, there is light at the end of this long dark tunnel!

With rates still at historic lows (roughly 5% with no points for a 30 yr fixed conforming loan!!), PLUS tax incentives, PLUS prices still low but drifting upwards, this is a great time to buy!  As one of my colleagues put it, “if you don’t buy now, you’re either broke or stupid!”  Kind of mean, but true!

Give me a call if you want to jump in and take advantage of the awesome opportunities out there right now (760-815-1318), or visit my website and do some searching on your own: www.DreamHomesByTheBeach.com.  North San Diego County Real Estate – a fantastic investment in your future and a paradise to live in!

In a housing market where tighter lending requirements have made FHA financing the only option for some buyers, this 90-day policy has (1) kept some homebuyers from being able to purchase affordable homes and (2) prevented the quick resale of foreclosed properties, which affects the ability of communities to stabilize and rebuild.

Flipping: before and after

On multiple occasions, this has affected my business personally -  I’ve shown a buyer a home that had been purchased by an investor, rehab’d and put back on the market, i.e. “flipped”, but because they could not obtain an FHA loan on the property if it was owned less than 90 days, these homes were beyond their reach.  The process of buying, fixing, and reselling foreclosed properties can often be achieved in less than three months time, so this policy was hurting both buyers and investor sellers.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

To ensure FHA borrowers are protected from inflated prices, the policy has certain restrictions, including:

• All transactions must be arms-length and there can be no identity of interest between the buyer and seller.
• If the sales price of the property is 20 percent or more above the seller’s acquisition cost, the lender must meet specific conditions for the waiver to apply.
• The waiver is limited to forward mortgages, and cannot be used under the Home Equity Conversion Mortgage (HECM) purchase program.

You can read the full text of the HUD waiver here.  The temporary waiver, which will expand access to FHA mortgage insurance to many, will be in effect for a period of one year, unless extended or withdrawn by the FHA. With this in mind, now may be an excellent time to purchase a foreclosure as a short-term investment!  Call me, Eva Meier, if you’d like assistance taking advantage of this new policy - there are many opportunities in coastal north San Diego County! 760-815-1318.

For those of us in Southern California, North Coastal San Diego County in particular, that means way more rain than we’re used to.  There’s no doubt we need it after so many years of water shortages, but the torrential downpours can cause problems. 

• Make sure all your drains and gutters are cleared of debris and are functioning properly before the rain hits. 
• If your home doesn’t have gutters, you may consider having them installed.
• Visually inspect nearby storm drains before the storm season and after every rain.
• If drain are obstructed, notify your local Dept of Public Works 

Stay dry and enjoy the show!

During the heyday of the new millennium real estate market, 2000–2006, unethical and sometimes illegal actions became common in the housing appraisal industry.  Inflating values became the name of the game.  Since most everyone believed there was no top to the market, this rounding off upward was supported by all of the players. Appraisers who answered to banks, realtors and mortgage companies tended to value properties higher than their worth often under pressure from their vested employers.
 

Inflated Appraisals Contribute to Bursting of Real Estate Bubble

These unsupportable high appraisals eventually helped drive the real estate bubble to burst in late 2006.  These unwise practices finally led to legal action by the Attorney General of New York in late 2007.

Trying to keep everybody honest, New York attorney general Andrew Cuomo sued the appraisal subsidiary of First American for conspiring with Washington Mutual to inflate appraisals.  The problem later spread to the mortgage giants Fannie Mae and Freddie Mac with national disastrous results for everyone.

An Attempted Fix of the Appraisal Process – HVCC

The public embarrassment surrounding this law suit forced all major lending agencies into creating the “Home Valuation Code of Conduct” (HVCC). The HVCC established a stringent set of rules addressing who can conduct appraisals and how they should be done.  Under these new rules, the appraiser may not be affiliated with or have any contact with any parties involved in the transaction.

HVCC’s Intention to Protect the Consumer Backfires

The new HVCC rules took effect in May of 2009 and, ironically, are now working against our now slowly recovering housing market.  Appraisers, who are unaffiliated with anyone connected to the sale, are under no pressure to meet deadlines and often submit low appraisals based on a lack of substantiating information regarding the properties they are working on.  This downward bias will slow recovery and further push against the market when we need everything going our way.

A Example of HVCC Pressures at Work in Cardiff, CA

Here’s a personal example of what happened to me as a North San Diego Real Estate Agent, helping a client try to purchase a Cardiff CA condo.  My buyers were renting a unit in Park Place Bluffs, a lovely Cardiff CA condo complex.  They very much wanted to buy a property there.  When one came on the market, a short sale, of course, and asking $265k-305k, they submitted an offer the first day, smack in the middle: $285k.  Unfortunately, 18 others also wrote offers!  We were all asked to resubmit our highest offer, and did so at $310k.  The 5 top bidders (we were among them), with offers between $310 and $320k, were then instructed to rewrite our offer for $290k, BECAUSE THAT IS WHERE THE LISTING AGENT THOUGHT THE PROPERTY WOULD APPRAISE!!, and submit along with credit scores, recent bank statements, recent pay stubs, etc, and the best candidate would win!  We ended up not being selected, and my buyers actually found a much better home in a different neighborhood.  So, here’s a property that 19 people were clamoring all over to buy, 5 of whom were willing and able to fork up between $310k-$320k, and it’s on the books as $290k!!  This does not help home values stablizie and recover!

Bottom Line – HVCC is Bad for Real Estate Recovery

The new HVCC has merit and in a normal market could work well.  But now, when the market is just beginning to recover, is not the time to push prices down by undervaluation.  This new solution for a past problem should be suspended until the cure will not kill the patient.

Effective July 1, 2009, here are the new guidelines that will apply:

• no washing down of paved surfaces
• eliminate landscape water run-off
• repair all leaks within 72 hrs of notification
• watering of yards is limited to no more than 3 days per week from June 1 – October 31
• homes with odd numbered addresses can water, Sunday, Tuesday and Thursday
• homes with even numbered addresses can water, Saturday, Monday and Wednesday
• Apartments and condos and businesses can water, Monday, Wednesday and Friday

Those of us living in these communities as well as other parts of San Diego County must all do our share to cut back on our water usage.  We tend to take our water supply for granted and don’t realize how fortunate we are to have access to reliably clean and fresh water.  So many don’t have that luxury…

But if that doesn’t motivate you, just keep in mind that non-compliance with water use restrictions during a Level 2 condition will result in a violation being issued and a fee being added to the water bill!

With the median California home price down 40-50%, homebuyers are definitely in the driver’s seat these days here in the Golden State.  And “first-time homebuyers”, i.e. those who haven’t owned a property in the last 3 years, really rule the road!

An even better “first-time” homebuyer’s market

In the past, the affordability index all but pushed these buyers out of homeownership, particularly when looking for San Diego homes for sale.  These folks have been saving and waiting, and waiting and saving, AND, finally, their time has come!  Unlike so many others who would like to take advantage of this great market, first time homebuyers, by definition, have no home to sell!  In addition, with the incredible interest rates out there right now, and the $8000 tax credit authorized by the American Recovery and Reinvestment Act of 2009, conditions are perfect for first time homebuyers. 

Better act fast

That said, this window of opportunity is a narrow one, and closing fast.  The market has definitely hit bottom in many low end areas, or, in fact, already passed it – and competition for these homes is starting to drive prices back up.   Moreover, the $8000 credit expires on December 1st, so eligible buyers had better act quickly!

Where the hot deals are

The coastal North San Diego County home markets  showing the biggest number of foreclosures, short sales and REO’s, are Vista, San Marcos and Oceanside.  There are almost 3000 properties under the conforming limit ($417,000) on the market right now in North County!  To learn more about how you can take advantage of this great buyer’s market and the various incentives available, give me a call (760-815-1318).  Don’t let this opportunity pass you by!

Del Mar Fairgrounds

I ought to know better after living and working next to the Del Mar Fairgrounds for the last 20 years!  Summer after summer, we locals learn to arrange our schedules around the traffic patterns generated by the San Diego County Fair and the race track season.  The problem is we forget that the Fairgrounds are also used throughout the year for a variety of events. In fact, the facifilites are used for over 350 events a year.  They include weddings, receptions, equestrian and other animal shows, concerts, craft shows, home shows, car shows and other social and consumer events.

When there’s an event going on, it can take hours to go a mile, and sometimes, there’s no way to turn around and take another route.  It can be rather frustrating, to say the least, and as I mentioned, it’s totally avoidable!  I am hereby promising myself to visit http://www.sdfair.com/ and check the schedule once a month to make sure I know what times and days to avoid.  Hey, and who knows?  I may even learn about an event I wouldn’t want to miss!  For example, I’m sure my 2 yr old and my 4 yr old would enjoy the circus that’s coming next week – I never would have known about it had I not written this post and checked the schedule!

If you’d like to take advantage of the great prices out there and buy a second home – a launching pad, so to speak – to all the wonderful events at the Fairgrounds, give me a call (760-815-1318)!  It is a phenomenal time to buy.  Or, if you just can’t take the traffic anymore and want to sell your Del Mar CA home, I have buyers for you!  Give me a call!

Running out of prefixes for 760

With the ever growing number of cell phone and fax users on the planet, combined with the tremendous increase in the quantity of homes in North San Diego County, the region using the 760 area code has rapidly been running of out of telephone numbers. 

To split or not to split 760 and 442

The traditional fix in the past has been to split the area into two, with one portion transferring over to a new area code.  This kind of split puts an enormous burden on small businesses as they must reprint stationery, business cards, advertising materials, signage, etc., not to mention the danger of losing connection to former customers.

A successful fight to keep 760!

442 Overlay map from www.Keep760.org

Thanks to an organized effort by keep760.org, and to the community participation in response to their urging, we have succeeded in getting the California Public Utility Commission (CPUC) to agree to an overlay instead.  What this means is that every number that begins with 760 will remain the same.  Only newly issued numbers in the overlay region will contain the new area code, 442.  The two area codes will coexist within the same geographical area.  This is phenomenal news and a huge victory for those of us doing business in this region.  And for those who live in Cardiff CA homes, Encinitas homes, Leucadia homes or owning property in other areas of North San Diego County, we have been spared a monumental inconvenience.

A minor downside

The only down side, and its merely a minor nuisance, is that the Federal Communications Commission (FCC) requires dialing the area code + telephone number for all calls where an area code overlay exists. But with most equipment featuring autodialing and speed-dialing, we’ll barely notice it.