Duplex Chick

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Sometimes, it pays to read more than just the headline in the newspaper.

The biggest real estate headline last week announced the extension of the $8000 first time home buyer tax credit through April 30, 2010.

But if you stopped reading there, you probably don’t know there’s more to the story.

Now there’s a tax credit for existing homeowners too.

If you’ve owned a home or owner occupied a duplex for the last five years, you are now eligible to earn up to a  $6500 tax credit if you sign a purchase agreement before April 30.

The credit may be applied for purchases of up to $800,000 for single family homes.

While I have not seen a cap on the purchase price of a duplex, only the portion of the property you intend to owner occupy is eligible to earn either tax credit anyway. For example, if you purchased a duplex for $200,000, you would count the value of your half, or $100,000, toward qualifying for the credit.

As always, any type of property you use as your principal residence may qualify for the credit. Vacation homes, however, do not count.

There is some debate among those who have the time to argue such issues as to whether or not the tax credit for existing property owners will help stimulate sales. The naysayers argue as these people have property to sell before they can buy, more inventory will hit the market, therefore further supressing prices.

In my opinion, if those people have duplexes or single family homes appropriate for first time home buyers, the additional inventory would be welcome. There just aren’t that many good lower end properties out there to choose from.

According to the Wall Street Journal,  Mark Zandi, the chief economist at Moody’s Economy.com, agrees with me. He thinks the expansion of the credit will result in 500,000 more home sales by the end of April.

That’s 10,000 more sold properties per state.

There’’s news worth reading.

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If you feel like you missed out on all the good deals before the expiration of the first time home buyer tax credit, there was some good news out of Washington yesterday.

The U.S. Senate voted unanimously to extend the clearance sale.

The $8000 first time home buyer tax credit will now run through April 30. An additional credit of $6500 will also be availabe to buyers who have owned their current home at least five years.

Buyers must have a purchase agreement in place by the end of April, and close on the property within 60 days. Single home buyers must earn less than $125,000 per year to qualify. Couples must earn a joint income of less than $225,000 to be eligible.

The credit would not cover the purchase of second homes, and in order to qualify, the price of the home must be less than $800,000.

Goldman Sachs estimates that approximately 70 percent of all current home owners may qualify for the expanded credit.

The National Association of Realtors estimates that as many as 400,000 recent real estate transactions.

The House of Representatives was expected to vote on the bill as early as today. If it passes, President Obama is expected to sign it.

Upon passage, wise duplex buyers should start shopping well before the April 30 deadline. It will help avoid those last minute tax credit shoppers and the multiple offers they inspire.

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Mrs. White, in the library, with a candlestick.

Signed purchase agreements up 53.8 percent from a year ago, sales of homes under $250,000 up 40 percent over the same stretch in 2008, and pending expiration of the $8000 first time home buyer tax credit.

Congress?

Get a Clue. Extend the tax credit.

Need further proof that it’s a good idea?

Compared to one year ago, there are 5300 fewer homes available under $250,000 than there were. What’s more, the Supply-Demand Ratio, which is the number of properties on the market for every buyer, is down 29.3 percent from 2008; to 7.69 per buyer.

In the duplex, triplex and fourplex market, sales were relatively constant year-over-year, with 38 properties receiving purchase agreements to last year’s 39. The average off market price, however, showed marked improvement, up $11,758.42.

Of the properties that pended, 18.42 percent were listed by traditional sellers. Last year, this mark stood at just 12.8 percent.

The biggest shift in the small multi-f market is evidenced in new inventory, which was down 9 percent from last year. The important fact here, however, was that 46.3 percent of those new listings were offered by traditional sellers; up significantly from last year’s 27.12 percent.

The Senate is promising to pass some sort of tax credit extension by week’s end before sending it on to the house.

Let’s hope they solve that mystery soon.

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Come winter, most duplex buyers turn their thoughts to the holidays and devising survival tactics to make it until spring.  After all,  icey sidewalks and knee deep snow are hardly inspiration for moving, right?

Well, here are five good reasons why everybody should.

1. The Tax Credit – While we’re still waiting for Congress to officially act on extending the $8000 first time home buyer tax credit, signs coming from Washington are encouraging. It looks, at the very least, as if there will be a new deadline of April 30th in order to qualify for the credit. Remember, in Minnesota, if you wait, sometimes it still snows in April.

2. Low Interest Rates – On Friday, both 30-year fixed conventional and FHA loans were at 4.875 percent. For those who are qualified, money is historically cheap to borrow.

3. Banks Don’t Wait Until Spring – Like many buyers, most traditional home and duplex sellers believe spring is the optimum time to move. As a result, they wait until they’ve seen the first robin to put their home on the market. However, banks don’t typically have the luxury of timing the market, and list their foreclosure inventory year-round.  This means there will be plenty of properties to choose from through the long, frozen months.

4. Fewer Buyers to Compete With – One of the challenges people rushing to beat the November 30 first time home buyer tax credit deadline ran into was they were not alone. A mad crush of buyers resulted in multiple offers on the more desirable properties, and a venerable frenzy to get there first. Winter, and its challenges, will keep many of those potential competitiors home until the first thaw; meaning you’re more likely to be able to buy a good property at a fair value, rather than a number that’s been inflated by fear.

5. You’ll Save A Lot of Money- Believe it or not, perhaps due to the preponderance of bank-owned properties on the market, the average sales price of a duplex that sold between October 1, 2008 and Februrary 1, 2009 was $23,000 lower than that of properties that sold between May 1, 2009, and August 1, 2009. 

Last I checked, professional movers didn’t cost anywhere near that much.