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I never thought that we would continue to see low rates this far into 2009. How much longer will the rates stay low and when will we see the inevitable rise? Interest rates today have not been this low since the 1940s; we are truly living in historic times. One of the main reasons that interest rates will increase soon is because the federal government will stop purchasing mortgage-backed securities, a main driver of low interest rates, on March 31, 2010. Many economists have theorized that once the government stops purchasing mortgage-backed securities interest rates will increase by three quarters of a percent. What that means to most of you is that rates will go from 5% to around 5 3/4 or 6%. That would still be historically low rates compared to where we’ve been for the last 20 years. This increase will have a significant impact on housing affordability and could impact a still fragile housing market. Every time interest rates rise fewer customers have sufficient income to qualify for new loans.

With only a few more months to go before rates creep back up to 6% we could be seeing the end of low rates for quite some time. My assumptions are based on the increase in economic activity, specifically housing activity, and eventually job growth. The Federal Reserve met today and confirmed that the mortgage-backed securities purchase program will end March 31, 2010 and that they are not anticipating extending this program passed the date. In addition they announced that Fed fund rates will remain low for an extended period of time because of recent economic indicators that point to signs the economy is improving.

I hope everyone has a happy and safe holiday season.

Seth Godin is one of the most relevant marketing experts today. I personally read his blog post every day and find tremendous value in his unique perspective and insight.

He just posted a free e-bookthat I highly recommend.

Enjoy

On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.

TAX CREDIT OVERVIEW
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible for FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.

Information provided by: The Mortgage Market Guide
©2009 MSS, LLC. All rights reserved.

On Monday evening, I stopped by the market on my way home to get some mushrooms for a soup Cheri was making that evening. The gentleman in front of me was buying $50.00 in groceries and handed the cashier a wad of coupons. It looked as if there were more coupons than items purchased but, since I wasn’t counting, I don’t know if that was the case. Anyway, once all of the coupons had been rung up the cashier told the customer he needed to pay $4.79. Wow, I was impressed….but then he gave the cashier even more coupons to get the final cost to 19 cents! That’s right, 19 cents. The customer, with a grin from ear to ear, pulled a quarter out of his pocket to pay for his cart full of groceries. He had saved the remarkable sum of $50.75 on $50.94 worth of groceries. This is the kind of thing you only see on the cover of the Enquirer. I truly believed it could never actually be done.

I thought I was a good coupon shopper, but this guy had me beat. I still wonder…..was there something going on between him and the cashier? It sure seemed like he handed in more coupons than items. Inquiring

Great news on the First Time Homebuyer Credit - The House of Representatives has approved legislation that would extend and expand the credit. The House vote came after the Senate voted on Monday to approve the extension but we still need to be cautious as there is more work to be done before the legislation is complete and signed off by President Obama. Indications are that the final bill, agreed upon by both the house and senate, should reach President Obama for his signature by the end of this week and his administration has indicated that the president will likely sign the bill.

Under the current proposal the income limits will be raised for individuals with incomes up to $125,000 a year and couples earning up to $225,000. The extension would cover new home purchases under contract by April 30th and will require them to be closed no later than June 30th, 2010.

The big news for current home owners is that the tax credit will be expanded to non-first time homebuyers as well. The tax credit will be slightly different for non-first time homebuyers as the credit is reduced from $8000 to $6500. In addition they must have owned a home for at least five of the past eight years.

Keep in mind that this bill is NOT final and will require the presidents’ signature. Stay tuned, and be aware that even if it is approved, it could contain further changes. Continue to watch my blog for more updates.

Many customers ask me if they should go to the expense of having a Radon test performed before buying a home. So here are a few statistics to consider:

The Environmental Protection Agency (EPA) states that radon gas is found in one out of 15 homes across the U.S. They also state that it is the second leading cause of lung cancer, causing an estimated 15,000 to 22,000 deaths per year. Because of this significant health risk there are many resources dedicated to combating this potentially deadly gas.

Radon is commonly found in the earth beneath homes, in well water and building materials like rock, bricks, and concrete. Radon gas can then seep into the house via the cracks in the basement floors, drains, loose-fitting pipes and exposed soil. After the gas enters the home it becomes an airborne carcinogen - a cancer-causing agent.

This is why I recommend to my clients that they get their home tested, especially if radon gas is prevalent in the area. Home testing kits for radon gas can be obtained from most of the local home improvement or hardware stores. In addition, you can hire a qualified radon service professional to inspect your home or most home inspection companies offer this as an additional service.

If you would like more information on radon gas, visit www.epa.gov/iaq/radon.  This website has extensive information detailing prevention measures and contact information for certified professionals in your area.

The other day I noticed a trend among people in the financial services and real estate industry billing themselves as “trusted advisors”. What bothers me about this self proclaimed title is that it implies that ordinary advisors are not necessarily as trust worthy. I had to ask myself, “What are these people thinking?” Are people distrustful of those in the financial services and real estate industry because they are perceived as being the catalyst for the current recession?

Gary Davis and I did a presentation a few years ago and after the presentation he told me to stop saying “trust me.” He stated it made me sound like someone that is not trustworthy. So, now when I see someone who calls themselves a “trusted advisor” the first thing I do is put my hand over my wallet. My belief is that trust is earned over time and can never be conveyed in your title or tag line. I have become wary of a person who calls themselves “trusted advisors” and was wondering if anyone else feels the same way.

Managing credit means checking your credit report and credit score frequently to know where you stand, and ensuring that you don’t have errors or possible fraud showing in your credit history. It also means using credit wisely to keep your score high, allowing you to benefit from the best possible financing terms when you need credit for large purchases like cars, boats or real estate.

Remember that checking your credit score (or when a financial services company checks your report for a promotional credit offering) is a “soft” inquiry that will have no impact on your score. Your score is only impacted when you make a formal request for credit resulting in a “hard” inquiry that can potentially lower your credit score. Don’t be afraid to check your credit report frequently so you know your credit status, especially prior to a major purchase.

The three major credit bureaus, Equifax, Experian and Trans Union, all offer credit management products that provide frequent access to credit reports, credit scores, analysis tools, and e-mail updates for an annual fee. They also offer one-time purchase of your credit score. In addition there are numerous third-party companies that offer similar products including the ability to show you all three credit bureau reports with each of their corresponding scores.

If you would like to get more information on this e-mail me for your free copy of “Your Credit Score - An insider’s guide to credit scoring and home financing”

Word of Mouth Marketing – a strategy in which you engage customers and get them talking about your service or products – can quickly grow your business. Here are some tactics for implementing a successful WOMM strategy.

1. Provide excellent customer service. Nothing spreads your name faster than delivering excellent service. One of the best books I ever read on this is Ken Blanchard’s book – Raving Fans

2. Diversify your network. Become visible and active in your community. Make a goal to meet five new people per week and share with them a few key points about you and your business. If you need help with this join a BNI (Business Networking International) group or some other networking group where you have the opportunity to perfect your 60 second commercial.

3. Give people something to talk about. Word of mouth marketing centers on the message you want to spread. Make sure you have something memorable, relevant and timely enough for people to share with others. Did you just help someone solve a unique problem? Are you going to be involved in an upcoming community fundraising event? Do you have a unique insight on the market that is valuable in helping others make more informed decisions?

4. Use technology to move your message. E-mails, blogs, Linked-In, Facebook and Twitter exist for you to be able to spread your message to a large audience quickly. If you have something that is relevant, timely, and scarce to share with people they will talk about you and your business to the friends and associates.

Visit the Word of Mouth Marketing Association website (www.womma.org) to learn more about this very effective marketing strategy.

When I was young I spent an entire afternoon riding the roller coaster at Dorney Park in Allentown PA (check it out at www.dorneypark.com). It was one of those great memories that only get better each time I remember it. The problem is that as I got older the joy of riding a roller coasters, specifically when I was in my 40’s at Six Flags in San Antonio, was replaced by two days of aches and pains from tired, old muscles. For those who are young, trust me that one day you too will be sore after riding a roller coaster.

That is exactly the way this recession feels to me. When I was younger and starting my career in the late 70’s, recessions were exciting times. My youth and enthusiasm (some would say naiveté) allowed me to see these times as opportunities to change the status quo, shake up the establishment and invent new processes that were better, faster and cheaper for my customers. Now it just makes me feel tired and worn out by the constant change and uncertain future. One day we have news of a recovery with housing sales increasing for the 5th straight month and the next day I read that this is not sustainable because 90% of the sales were the result of foreclosures, short sales and government stimulus programs for first time home buyers. One day the stock market is up and gas prices are down then the trend reverses.

So I made a choice today to not let these challenging times wear me out but to embrace them the way I did when I was younger. This is really a great opportunity to change the status quo, shake up the establishment, be inventive and create news ways to take better care of my customers. After all the physical muscles that were sore after riding a roller coaster are not the same as our mental muscles that can get sore from constant change and uncertainty. Our mind can be strengthened immediately by just changing our attitudes, actions and ambitions. I think if everyone did this we would see this recovery take hold quickly but for now I can at least strengthen my mind and thrive in these challenging times.

How about you?