Tax Credit for First-Time Homebuyers

November 3, 2011

Dear Darrell:
I was looking for a condo to buy, and since I am a first-time buyer, wanted to buy something before April 30 so I could get the $8000 tax credit. Now that program has expired. Do you know if it will be reinstated any time soon?
— Jay L, Foggy Bottom

Dear Jay:
I’m sorry you didn’t make it under the wire. I haven’t heard any specific rumblings about the $8000 tax credit being offered again. Everything I have read about it seems to indicate that it will not be offered again. However, that program did offer a great opportunity for many, many buyers, and it wouldn’t surprise me to see a strong push to bring it back.

In the meantime, however, buyers in D.C. still have the opportunity to use the $5000 D.C. tax credit. This federal tax credit is available to first-time homebuyers in the District of Columbia. There are more restrictions related to this credit than to the $8000 credit, but it is still a good deal for those just getting started.

Additionally, you should look into the D.C. Homestead Exemption, and the D.C. Tax Abatement Program. These are other programs specific to D.C. which can help you as you purchase your first property. I encourage you to speak with a loan officer who can explain the specifics of how these programs work. You can also go to the District Web site (www.otr.cfo.dc.gov), which has a lot of information. I find this site somewhat difficult to search, so you may want to call the phone number given on the site to get specific direction.

Darrell Parsons is the managing broker of the Georgetown Long and Foster office and abides by Equal Housing Opportunity regulations. Have a real estate question? E-mail him at darrell@lnf.com. He blogs at georgetownrealestatenews.blogspot.com.

Is MRIS Worth It?


 

-Dear Darrell:

I recently interviewed a couple of agents about selling my house. Both agents told me about the realtor listing system, the MRIS. That’s the system they use to let other agents know about the sale of property. One thing about it was confusing, though: one agent said that I should put it in the MRIS immediately to get the widest exposure. The other agent suggested marketing it privately for a period of time and then putting it in the MRIS later on if it didn’t sell right away. They explained the advantages of their different approaches. What do you think are the pros and cons?

Carol E.
Woodley Park

Dear Carol:

I definitely come down on the side of listing the property in the MRIS immediately. Here’s why: houses are subject to the same competitive market forces as any other marketable commodity. The buyers are comparing my house to other houses in myriad ways. This will happen with your home, too. Through this process, potential buyers become highly educated about the comparative value of properties. In the end, it is these potential buyers who largely define the market price of a given property. The truth is, none of us knows what a buyer will pay for a house until it is offered for sale. If a seller has underpriced her house, the buyers will bid against each other for the right to buy it. Likewise, if the house is over-priced, buyers will turn away from it in favor of a house they know will be a better value for them. The only way to get this kind of feedback is to disseminate the information about one’s house to the widest possible pool of potential buyers. And nothing comes close to the MRIS in that regard.

There are isolated instances where offering a property as a “private” or “quiet” sale is necessary or desired. But the vast majority of houses benefits by being in the MRIS. One of the supposed appeals of having a private sale is that it seems that one can control who comes to see the property. The downside to this is that it automatically eliminates a wide swath of potential buyers, and regardless of the intent, could be perceived as discriminatory. I recommend opting for the MRIS route so you can get the most exposure and, consequently, the best sale price.

Darrell Parsons is the managing broker of the Georgetown Long and Foster office and abides by Equal Housing Opportunity regulations. Have a real estate question? E-mail him at darrell@lnf.com. He blogs at georgetownrealestatenews.blogspot.com.

Ask the Realtor


Dear Darrell:
I have been thinking about selling my house, but want to do it at the optimal time. I see one day in the news that the real estate market is getting better, and then the next day see that it isn’t. I can’t wait forever to sell my house, but on the other hand, I don’t want to sell it today and then discover that I could have sold it for a lot more six months from now.

Libbie R.
Georgetown

Dear Libbie:
That is a tough question. There are so many things which go into the decision to sell. It’s sounds like you aren’t under the gun to sell, and so you have some flexibility as to when to put your house on the market. In some ways that makes the decision all the harder, because absent an outside driving force, you are left with trying to “read” the market in order to determine the best time. In that task you are joining a large company of realtors, economists and others who are constantly trying to do that very thing.

The current reality of our market is that it is sporadic. It changes direction from week to week, neighborhood to neighborhood, and price range to price range. The general overall trend, however, is in the direction of a higher number of sales. In the past few months, the number of sales has been increasing, but compared to last year at this time, the average prices are lower. This is in large part because the strongest part of the market has been lower-priced properties being purchased by buyers who were looking for the $8000 tax credit. That makes the numbers spike but lowers the average sale price.

In your case, I suggest you find a realtor who will help you analyze your local market for the number and frequency of sales and the ratio of list price to sale price. If you look at that data closely, you will probably be able to reasonably conclude whether now is a good time to sell. It may come down to deciding if you can live with the price you can likely negotiate for your house at this point.

Darrell Parsons is the managing broker of the Georgetown Long and Foster office and abides by Equal Housing Opportunity regulations. Have a real estate question? E-mail him at darrell@lnf.com. He blogs at georgetownrealestatenews.blogspot.com.

Ask the Realtor


 

-I want to begin the process of buying a condo, but I don’t know where to begin. I know it is recommended that I find an agent to help me look, but I don’t want to get stuck in some arrangement which I might not like. How do I get started?
— John H., West End

Dear John:
I understand your hesitance to engage the services of a real estate agent. I know it can seem like a commitment you don’t necessarily want to get into, especially at the beginning of your search. At the same time, agents are best situated to know about properties coming on the market, and are a great help in lining up financing and inspections, and helping you work your way through the contract forms, disclosures, etc. Statistics show that around 87 percent of all buyers start their search on the Web. I recommend that to you as a way to get started. As you sift through properties, you will begin to get some idea of prices and neighborhoods, and will likely run across agents who seem to be prominent in given neighborhoods or price ranges. At any point in your search you can contact one of those agents to explore a working relationship.

The second thing I suggest is to go to open houses on Sundays. In that process you will meet many agents, and see many work styles. Invariably one of them will appeal to you, and then you can explore a working relationship with that person.

Finally, the National Association of Realtors (NAR) recently launched www.houselogic.com. This is a free, comprehensive consumer Web site about all aspects of home ownership. It provides timely articles and news, home improvement advice and info about taxes, home finances and insurance. This site would give you a good basic introduction to the world of home ownership. Buying a home is a reasonably complex process, from learning neighborhoods to making offers to negotiating to inspecting. A professional realtor can be invaluable in every facet of that process.

Darrell Parsons is the managing broker of the Georgetown Long and Foster office and abides by Equal Housing Opportunity regulations. Have a real estate question? E-mail him at darrell@lnf.com. He blogs at georgetownrealestatenews.blogspot.com.

Reviving Dead Space


The owners had lived in Europe and loved old buildings, their secrets and surprises. They decided that Georgetown was the perfect place to find the right convergence of a period architecture, space with good “bones” and character that would be a suitable canvas for their creation. Together with their architect, Christian Zapatka, a champion of and expert in period Georgetown buildings, they pursued their quarry.

Their hunt took them through myriad clapboard row houses and brick Georgians until they happened upon their “crumbly cottage,” the dark, dowdy little 1810 Federal that they knew would unfurl into a spacious, light-filled beauty.

The potential lay, in great part, in its semi-detached orientation, with three exposures. Zapatka, an expert in keeping the period aspects of a house intact while giving it a fresh 21st-century makeover, gutted the entire house and then carefully put it back together, weaving together traditional crown molding and woodwork and reclaimed hardwood flooring, with updated lighting and modern space planning.

His greatest challenge was to create another entire level of livable space. Typically attics yield a treasure trove of reclaimable space, but in this case, it needed to be squeezed out from a four-foot earthen, windowless crawl space. His team dug deep, moving another five feet of earth, much of it by hand. Changing an earthen dungeon into a inviting living area is a challenge, and not every basement is a good candidate for finishing. Key considerations for conversion include controlling moisture, adding ventilation and light, and finding a way around hanging drain lines, ductwork and wiring. Added challenges stem from digging around what was once the original kitchen, judging from the huge masonry fireplace, of a 200-year-old building.

Although many finished basements in old houses are musty, dinghy affairs, proper planning, new products and architectural expertise yielded an additional 600 square feet of living space that includes a gourmet kitchen/family room, an office/guest room, a new full bath and a landscaped yard.

Walls of creamy curly maple cabinets hide a flat screen television and stereo equipment and provide plenty of storage. An open floor plan, a sparkling stainless steel mosaic backsplash, skylights, limestone floors and countertops and abundant high-efficiency windows make one forget that this was once a subterranean space.

Michelle Galler is a realtor with TTR/Sotheby’s International Realty, an interior designer and antiques dealer who resides in Georgetown’s West Village. If you have resolved a George¬town design challenge that would be of inter¬est to our readers, contact Ms. Galler in care of The Georgetowner.

Photographs by Amy Snyder Photography

Designing House


What happens when you gather the greatest minds in the Washington design world and sic them on a newly built home? You end up with the Washington Design Center’s 2010 Design House, a glittering amalgam of styles new and old tied together by some of the freshest design thinking around. John Blee sits down with a few of the Design House’s featured decorators to get their perspective.

How did you accessorize your section of the house?

NESTOR SANTA-CRUZ [STUDY]: I used mostly my own personal accessories, paintings, vases, etc. I wanted it to be a very personal look, something that matches my work and meets the style of Elle Decor. I wanted a sense of abstraction, but also a realism in the actual pieces I selected. Mostly from the 1930s and 1940s. I use objects, textiles, carpets and furniture as pieces of an interior architectural vocabulary. Objects must talk to each other. The design language is the same even when mixing styles/periods. It’s a Latin and an American mixed way of looking at European precedents.

MELINDA NETTELBECK, ADAMSTEIN & DEMETRIOU ARCHITECTS [MASTER BEDROOM]: To accentuate the cosmopolitan feel of the space, we collected photography and ceramics from local galleries in black, white, and neutral shades. The sensual lines of the pieces add a feminine touch to an otherwise masculine space. The rich colors in the photography above the bed and unique lighting bring a playful element to the room.

FRANK RANDOLPH [PORTICO]: I put classic furniture that can stay there in all seasons. The entrance and exit of a home should look as good as the interior. I was thinking of classical Tuscany. Porticos go back to the Greeks and Romans.

Are there any aspects of your way of decorating a room that have changed in the last few years?

RANDOLPH: Yes, I am using more color, including shades of lavender and mauve and periwinkle blue. They make me happy. I bought a periwinkle shirt at Brooks Brothers the other day and it made me feel the same.

SANTA-CRUZ: That’s really a good question. I really think my work evolves, but if I had to say something, my work is more edited, more sophisticated, because I know the reference to the history of design, yet I want to provide a point of view, a personal quality, and both visual and physical comfort. It’s more edited than ever.

Did you have an imaginary client in mind when you designed the room?

KELLEY PROXMIRE: I imagined that a young female New York socialite living on Park Avenue lived in this space.

RITA AT. CLAIR [FAMILY ROOM]: I had an imaginary client: a family that enjoyed being together. An active family that enjoys sports, travel and art. That uses this room for family planning of their activities. A family that enjoys television, as well as the use of a fireplace. This family is also aware of design, perhaps not the trendy styles but good design in both antiques, art and contemporary styling.

SANTA-CRUZ: Yes, in a way. I really looked for inspiration to French decorator Madeleine Castaing. I wanted to use blue, her favorite color, and combine it the way she did: with yellows, reds, greens and dark furniture. But, I also wanted to fit the Elle Décor style: personal, designed and yet very today, very eclectic. I also do not like rooms to be only masculine or feminine. I like it to be able to be both.

Do you coordinate with other designers when you do a show house?

SANTA CRUZ: No, I never do that. That’s of no interest to me.

I think a show house needs to be like haute couture: present a point of view, a moment, yet send a message that design is important in our lives, regardless of cost. I have items in my room that cost very little when I bought them. The point is that I explore ideas that I have been “floating” in my mind for a while, and a show house can test those. With all the respect to my Hall of Fame colleagues, and I truly respect them, I am doing this to inspire: other designers, students and amateurs of design, manufacturers and editors, the public in general.

I hope when visiting this room, one takes an idea or two, good or bad, like it or not. I want people to question why I did what I did, even if they wouldn’t do it with my vision. If a show house is not used by the designers as way to teach or inspire, or confront other ways, then we are not doing our jobs as designers. I can tell you that I don’t want it to look like a high-end hotel room or a show room.

ST. CLAIR: Yes, I coordinate with two or three people on my projects; however, the showhouses we do are few. This particular showhouse has my personal name on it. Therefore, it is my design concept, selections and oversight. However, like in all my personally designed spaces, two designers on my staff, Brian Thim and Polly Bartlett, have not only coordinated my ideas but they have made the room happen.

What are you happiest with about your effort?

PROXMIRE: Scale. The space is very large for a foyer (approximately 18.5 by 27 feet) with very low ceilings. I wanted to make the space be welcoming and not too cavernous. I accomplished this by using dining room table bases for console tables, large round skirted table in the middle and adding a window to break up one long sidewall.

NETTELBECK: Because the architecture was about sculpting the walls, the faux finish was instrumental in creating a dark and seductive foundation. We used a simple crosshatch finish that provided the elegance of wall covering without the seams. In contrast, the light polished marble and luminous wall covering helped to define focal points, creating zones of activity within the large room.

ST. CLAIR: I am most happy with the room because it is as I wanted it. A family room is a very special place in a home. It must first be expressive of the taste and character of its occupants. A designer’s role is to organize the room with the necessary furnishings, personal objects and the usual family chaos that the family comes with, and form a functional and an aesthetically pleasing space. If that is accomplished, we have a successful design project.
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Homebuyer Tax Credit Lives


On November 6th, 2009 The Worker, Homeownership and Business Assistance
Act of 2009 was signed into law. The law extends and expands the first-time homebuyer credit allowed by previous Acts. Highlights of the new law include the following:

– Extends deadlines for purchasing and closing on a home.
– Authorizes the credit for long-time homeowners buying a replacement
principle residence.
– Raises the income limitations for homeowners claiming the credit.

Under the law, an eligible taxpayer must buy or enter into a binding contract to buy a principal residence on or before April 30, 2010. Closing on the home must take place no later than June 30, 2010. Taxpayers on qualifying purchases made in 2010 have the option of claiming the credit on either their 2009 or 2010 tax return.

Long-time homeowners who purchase a replacement principal residence may also claim a homebuyer credit of up to $6500 for married couples or $3,500 for single filers. The homeowner must have lived in the principle residence for no less then five of the last eight years ending on the date the replacement home is purchased.
Another enhancement to the legislation includes
higher income limits for homes purchased after Nov. 6. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply
to purchasers of home on or before Nov. 6.

The maximum purchase price of the home under the new rules is $800,000.

Additional information includes:

– Credits apply only to homes used as a principle residence by the taxpayer.
– The credit will either decrease a taxpayer’s bill or increase their refund dollar for dollar.
– Is fully refundable, and will be paid out to eligible taxpayers even if they owe no tax or the tax credit is more than the tax owned.

The homeowner does not have to pay back the tax credit unless the home ceases to be their primary main residence within a three-year period following the purchase. This means the home cannot become a rental property or a second home during the three-year period.

According to statistics from The National Association of Realtors upwards of 350,000 homes were sold as a result of the homeowners tax credit legislation, and upwards of 500,000 additional home sales are anticipated as a result of the new legislation. With the extension and expansion of the legislation, this continues to be an excellent time to purchase a home.

Bill Starrels lives in Georgetown and is a senior mortgage loan consultant. He can be reached at 730-625-7355 or [bill.starrels@gmail.com] (mailto:bill.starrels@gmail.com).

Rumblings at the Federal Reserve


There was a shot across the bow in the financial markets on Feb. 18, when the Federal Reserve raised the interest rate it charges banks for emergency loans.

The markets reacted predictably to the news. The bond market sold off with the yield on the 10-year treasuries, moving to 3.8 percent, a level not seen since late last summer. Mortgage interest rates, which follow the lead of the 10-year treasuries, also moved higher.

Earlier in the day, rates for conforming 30-year fixed rate loans were around 5 percent with no points. By the end of the day the same rate commanded three-fourths of a point more in fees. The rates on 15-year fixed rate products essentially moved 12.5 percent higher in rate.

Similar moves were seen in government-backed mortgages, otherwise known as FHA or VA loans. Rates essentially were an eighth higher then before the Federal Reserve’s actions.

The slight tightening reminded people that the Fed is looking forward to exiting some government-sponsored programs and future tightening of interest rates.

The Fed still views the overall economy as recovering from the severe recession, but highlights that the economy is still not strong. Until the economy proves that it is in much stronger condition, the Fed is not likely to do any broader policy hikes.

Some called the reaction to the Fed’s decision overblown and highlighted the rise in the discount rate of .25 bps was not reflective of the economy as a whole and was a normalization of some aspects of the credit markets.

Remember, Wall Street loves volatility. One has to keep in mind that traders make money when markets move.

Most economists still think true tightening by the Feds is a ways off. Most are calling for tightening to begin no earlier then 2011. Others think the tightening may further down the road. The bottom line is the economy has to show stronger signs of economic strengthening before rates are raised.

Mortgage interest rates will eventually rise, but presently remain low. It is still an excellent time to refinance or purchase a home. The Federal tax credit for buying homes is still in place. House prices remain low compared with prices of a few years ago. As we all know, what goes down eventually moves back up.

Bill Starrels lives in Georgetown. He is a mortgage loan consultant. Contact him at 703-625-7355 or bill.starrels@gmail.com.

The State of Mortgages


 

-Mortgage rates remain in a narrow and favorable range. In recent days, rates for 30-year fixed-rate mortgages as gauged by Freddie Mac averaged below 5% percent again. This means for a primary house mortgage with at least 20 percent down and very good credit, rates are quite attractive. Interest rates on government insured FHA and VA mortgages were slightly higher.

Fifteen-year mortgage rates typically carry rates that are around a half to three-eighths lower then typical 30-year rates.

Interest rates on adjustable rate mortgages that have fixed terms of three, five and seven years were approaching a rate of 4 percent.

The turmoil in the European markets produced instability in stock markets worldwide. When stock markets falter, investors put money into safer investments, which include the bond market. When bonds do well, so do interest rates. The yield on the 10-Year Treasuries was testing the 4 percent level before the turmoil in the stock markets. The yield for 10-Year Treasuries is now in the 3.5 percent range. The “flight to safety” should continue for at least the short term.

Inflation or the fear of inflation is the major driving force for a rise in interest rates. There is little fear of inflation, nationally or globally. Some economists state that the long-term trend in inflation globally is titled in the direction of less inflation or even deflation.

In the short term, there is no doubt that inflation is well under control and there is no fear of inflation rearing its head.

If the European Union slides towards recession, then there will be no chance of interest rate rises by the Federal Reserve in the foreseeable future.

Employment is starting the long road back to recovery. Jobs are starting to increase. However, more people are coming back into the job market, looking for jobs. That is why the unemployment rate rose to 9.9 percent, even though there was healthy job growth. There is a lot of work yet to be done.

Underwriting standards remain strict. This means a loan has to be well documented with all the income and asset statements. If there is a gray area on a loan, the underwriter will cast doubt instead of giving the benefit of the situation. Mortgage loans are available, but the client has to be well qualified.

If you are in the market for a mortgage, this can be a good time for you. Rates are low and as long as you can meet the underwriting criteria, you should end up with an excellent mortgage.

Bill Starrels lives in Georgetown, specializing in residential mortgages. He can be reached at 703-625-7355 or bill.starrels@gmail.com.

The Markets are Volatile


 

-The roller coaster ride in the financial markets continues. Some of the swings are good for interest rates — some are not so good. At best, it is a nerve-racking time for anyone who is watching their investments.

The severe economic problems in Greece precipitated a flight to quality — a rapid switch by investors to less risky investments such as gold or bonds — in the markets. Investors sold off stocks in a large way. The Standard and Poors 500 index has had a wild ride in the last few months. The index topped out on April 23 at 1,217 points, and on May 25 dipped to 1,025 — a swing of 16 percent.

The 10-Year Treasuries on April 23 yielded 3.82 percent, just shy of its high watermark on April 7, when the yield was 3.86 percent. On May 25, the yield dipped to 3.16 percent.

The London Interbank Offer Rate (LIBOR) index, to which many adjustable rate mortgages (ARMs) are tied, spiked to 1.016 percent in May from a low of 0.846 percent in February. Most adjustable rate mortgages add a margin of 2.00 percent to the index that gives the mortgage holder their newly adjusted interest rate. This means those newly adjusted ARMs would be around 3 percent. These rates are still very low by any standards.

This is a good time to be educated on locking and floating interest rates. When you take out a mortgage for a purchase or refinance mortgage you have to choose when you want to lock in your interest rate. You can lock it in at the time of application on a refinance (though on a purchase loan you need to have a contract in place). The lock exploration can be anywhere from 30 to 90 days. If your settlement date on a purchase is 45 days out, then you need a 45-day lock.

Once you decided to lock in, the rate will not go up or down during the lock-in period. If you locked for 45 days at 5 percent with no points, this will not change during the 45-day period.

If your lock expires before the settlement can be completed, then the lock has to be extended. If the “new” rates are higher then the “original” rate, then the “worst case” scenario is used. In this example, if 5 percent now costs a half point, then the new rate will be 5 percent with half of a point. If rates are lower when the lock expires, then the original lock is used. So if the “new” rates are 4.875 percent with no points, the customer does not get the lower rate. They would have to stay with the 5 percent rate.

Sometimes rate locks can be extended before the locks expire. There is no advantage in letting a mortgage lock expire. The only time the newer rates can be used is if the rate has expired and over 30 days have elapsed.

During this period of turbulence, interest rates have gone lower, which has caused a lot of customers to question if it is a good time to lock in or if they should look for even lower rates. Those who were locked in questioned if they could float down to a new, lower rate.

On rare occasions a float down can be accomplished. For this to happen there has to be a very significant drop in rates that allows for an adjustment to be made. The bank has to add on some additional pricing so it does not lose money on the adjustment. The usual outcome is the prevailing rate, plus 1/8. The latest fluctuation in rates was not enough for a float down to be triggered.

During these periods of market instability, instead of trying to time the markets, jump on rates when they tick down. If you are offered a fixed rate with a “4” in front of it, be happy. Remember that rates generally rise faster than they fall.

Bill Starrels is a mortgage loan officer who lives in Georgetown and specializes in refinance and purchase mortgages. He can be reached at 703-625-7355 or bill.starrels@gmail.com.