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Kent Redding

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Home Buyer Tax Credit Answers

by Kent Redding

We have been getting quite a bit of questions from home buyers recently about the "tax credit" which has changed forms many times of late.  It is our understanding that President Obama’s $787 billion stimulus bill was passed into law last Tuesday will grant an no-repayment credit equivalent to 10 percent of the purchase price (up to $8,000) for first-time home buyers of principal residences between January 1st 2009 and December 1st 2009. This is unlike the previous $7,500 credit available to this group of buyers, the credit outlined in the American Recovery and Reinvestment Act of 2009 does not have to be paid back

Who is eligible: First-time homebuyers or anyone who hasn’t owned a principal residence for three years before buying a home. (Date of Purchase is the day the title transferred) There are also income limitations applied to eligibility. Single buyers must have a modified adjusted gross income of less than $75,000 or $150,000 for married couples to receive full credit.

What is my timeframe: In order to receive the $8,000 refundable tax credit you must purchase a property and have the title transferred before December 1st of 2009.

What property qualifies: Principal Residences, Vacation or Investment Properties. This can include single-family homes, condominiums, townhomes, apartments, and cooperatives.

Those that qualify have the unique opportunity for $8,000 government dollars or potentially up to half of your down payment toward the property of your choice.
It is a great time to by in Austin.

Hmmm....Is it a good time to sell and move up?

by Kent Redding

I have recently been contact by several clients indicating a desire to buy and move-up, but concerned that it is not a good time to sell.  Oftentimes there are misconception by sellers in a buyers market as they consider the sell of there home.  It is, in fact, a great time to sell!

Consider this hypothetical.

Balanced market:

$500,000               Seller Smith’s current home value in a balanced market.

$650,000               Seller Smith’s new home value in a balance market.

$150,000               move up cost

Buyer market- values down 15%:

$425,000               Seller Smith’s current home value in a buyer market market.

$552,500               Seller Smith’s new home value in a buyer market

$127,500               move up cost

*other benefits include broader selection buyer market and when market cycle back upside is stronger on new home they prior home

Seller market- values up 15%. (Seller Smith decided to wait out the slow market until things “bounce back”)

$575,000               Seller Smith’s current home value in a sellers market.

$747,500               Seller Smith’s new home value in a sellers market.

$172,500               move up cost

                                *other concerns for a move up buyer in a sellers market include less selection, more multiple offer competition and since history has shown a certainty that markets are cyclic then Seller’s Smith new home value bought in an up peak for the market is more likely to not appreciate in the near future or possible depreciation some as the market cycle back down over the next few years.

All this is assuming Seller Smith’s employment is stable, financial plan is in place and the family budget can afford the new purchase. 

Hey America, let's get moving.

First-time Homebuyer Tax Credit

by Kent Redding

We have been getting quite a number of requests for information on the "First Time Homebuyer Credit" that was introduced through legislation this past summer. The following is the view from here.

A bill signed into law on July 30th, 2008 (H.R. 3221) will allow first time homebuyers meeting specific criteria to utilize a $7500 tax credit on the purchase of a primary residence. In order to qualify for the tax credit the home must have been purchased on or after April 9, 2008 and before July 1, 2009. I encourage anyone interested in claiming this credit is to consult your tax advisor.

 

In summary in is my understanding the bill includes stipulations for amount of credit, eligible property criteria, income limits, and a recapture clause in regards to this tax credit. The act specifically stipulates a temporary tax credit could be issued for of up to ten percent of the cost of a home but not to exceed $7500. For example on a home costing $55,000 the potential maximum credit allowed equals $5,500. Any home costing more than $75,000 still has only a maximum credit potential of $7,500 total whether it is $150,000 or $350,000. This credit cannot be used toward down payment as there is currently no provision made for that process. Instead the home buyer would claim the credit when filing their income taxes and use IRS form 1040 and any additional forms requested by the Internal Revenue Service. Additionally, this credit cannot be used in conjunction with any tax-exempt bond programs offered by a state housing agency.

 

This tax credit is available to first-time home buyers and previous home owners that have not owned a primary residence during the past 3 years. The property must be located in the United States and be classified as a single family residence which includes condos and co-ops. The eligibility for this tax credit can also be impacted by the amount of adjusted gross income earned by the home buyer. The maximum credit is available to a single buyer with income of $75,000 or if married and filing joint tax returns the maximum is $150,000 for the couple. The credit is still available to an individual with income of up to $95,000 or up to $170,000 for a joint return but the credit amount is reduced. For example a couple making $165,000 of adjusted gross income would have their potential credit reduced to $1,875.

 

Finally and most importantly to understand about this tax credit is that it must be paid back, called the “recapture clause.” Many consumers find the easiest way to understand this tax credit is by thinking of it as an interest-free loan. Any home buyer that claims this credit on their taxes becomes subject to repay the credit over the next 15 years at a percentage of 6.67% per year with no interest accrual.

This equates to approximately $502.50/year x 15 years assuming the $7,500 maximum credit. If the home is sold prior to the 15 year repayment period the remaining balance would be paid from the proceeds of the home sale. If the proceeds of the sale do not cover the remaining balance then the outstanding balance may be forgiven. Again I encourage you to visit a tax advisor as the rules and logistics of this program are still evolving. Purchasing your first home may seem daunting in today’s world of “mortgage crisis,” high gas prices, and a seemingly unstable economy but help is available.

 

More information can be found at the National Association of REALTORS® website. Visit http://www.REALTOR.org and search H.R. 3221 for more information.

Time to refinance?

by Kent Redding

Since interest rates are continuing to stay low, lately I have been receiving numerous calls from buyer clients wondering if they should re-fi.   I generally defer them to their mortgage lender, however, I like to have some general advice so as a rule of them I suggest they plan to be in their home at least 5 additional years and their current mortgage rate is above 6.25% they might consider a re-fi.  The cost to re-fi can be in the $2K-$3K range and you likely need a 1- 1.5 point spread it rates to come out ahead over time. In addition you typically will need 20% equity and a credit score of 720+ to get the best rates

Where's the Bottom Again?

by Kent Redding

I often get asked "How's the market and your business?" and "When will I know when housing hits the bottom?". 

Well my business is phenomenal.  I just posted the best 2 sales quarters in my career and I am now comfortably the Top Prudential Residential Agent in Austin.  There may be talk and hints of a recession.  I am just choosing not to participate in it. 

In regards to "When its going back up again".  I think that is flawed thinking.  You will know the market is going up AFTER you see it hit bottom, but that is too late.  The best time to buy is while its still going down when there is no competition, rates are low (like in the mid 4's now!) and selllers are more willing to deal in most cases.  

Click below to see an article from the National Realty News which seems to indicate we might come out of this housing slump in 2009.  If this is true, then we all know people will start buying homes en-mass at one time, driving up prices. 

If you click HERE you can view the article.

Homebuying 101

by Kent Redding

1.) Enjoy Yourself!
You’ll soon learn that there’s nothing in the world like the satisfaction that comes from owning a brand new home. Looking for a new home that fits your needs and desires is fun, but it is important to start with a good checklist.  You can download one by clicking here – Kent Redding Homebuyer’s Check list.  During your home search it critical you carefully review the workmanship and detail of your potential home and ALWAYS get your home inspected by a licensed professional.  After all, this is a big investment (quite possibly the largest you’ll ever make) and you deserve nothing less than the best.  Take pride in your accomplishment - this is a big moment!

2.) Make sure you are comfortable with the location of your new home. 
Location is perhaps the most important aspect of new home buying.  Before you purchase a home, be sure to familiarize yourself with the neighborhood. How far will you have to travel to get to shopping and transportation?  Will your new home be in a good school district?  Will there be entertainment and recreational facilities nearby (movie theaters, restaurants, health clubs)?  It’s important to take all of these factors into account when deciding where to buy.

3.) Shop around for movers if you don’t plan to move yourself
If you plan on hiring a mover, be sure to get more than one estimate.  More often than not, you’ll find that shopping around for the best deal pays off big time – you may save hundreds of dollars!  We are happy to share our mover referral list.

4.) Make sure that all important parties are aware of your new address.
Be sure to forward your mail before you move.  You’ll also want to contact your bank or other financial institution to let them know of your new address, as well as the IRS.  It’s a good idea to inform your credit card companies as well, and you’ll also need to change your car registration and drivers license addresses.

5.) Know all important and emergency phone numbers.
Make sure that you are aware of all important phone numbers for your area, such as police, utility companies and your local public works department.  Be sure to keep a list of these numbers near the phone.

6.) Familiarize yourself with your condo declaration (if applicable).
Whether you are buying a free standing house or an attached home or condo, your community most likely has a HOA and/or condominium declarations, which contains all of the rules and regulations of the community.  Be sure to read through it carefully, so that you are familiar with all of the procedures and practices of your new neighborhood.

7.) Know routes to hospital/medical facilities
Always know where the nearest hospital is, and the quickest way to get there.  Taking the time to map out an effective route to the closest medical facility is important to maintaining the health and safety of your family.

Austin Mandatory Energy Audits Begin in 2009

by Kent Redding

City of Austin Energy Beginning in Summer 2009 the City of Austin will require that a Seller of a non-exempt home disclose to a prospective buyer the results of an energy audit of the home at the same time that the Seller makes other disclosures required under Texas law. The audit would be prepared by an individual or company authorized by Austin Energy.

The Seller would have the choice of selecting as its auditor a disinterested third party who may not make repairs (and who therefore has no financial incentive to over-report needed repairs) or a home energy contractor (who may agree to apply the cost of the audit to the cost of performing repairs). The audit would include visual inspections as well as the testing of the mechanical or air conditioning system air leakage using methods and standards approved by the City of Austin Energy Code (duct blaster test, blower door subtraction test, etc.). The audit must be conducted by a person certified by the Building Performance Institute or other accrediting agency approved by Austin Energy as a Building Performance Analyst or equivalent.

 

As of now, the task force has not decided which month the ordinance will begin enforcement.

Goal Setting 2009

by Kent Redding

Below is an article from Success Magazine that I thought worthy of sharing as we approach 2009.

______________________________________________________________

How I Do It - Vic Johnson

Think Big - It Starts with a Goal

 By Vic  Johnson 

Vic Johnson is a best-selling author, speaker and self-described infopreneur. His recent book, Day by Day with James Allen, has sold more than 60,000 copies worldwide. Johnson also is an expert on goal-setting; he co-founded The Champions Club, an international group of goal achievers, and founded a goal-setting portal and blog called Goals2Go. He also hosts Goals 2 Go on The Success and Training Network (TSTN).

Why is it important to set goals?

Most people wouldn’t think of going on vacation without 1. deciding where they were going to go and 2. determining the best way to get there. At its most basic, that’s all goal-setting really is. In the absence of goals, we’re likely to end up at a destination in life that falls far short of what we’d like.

Many people have hopes and dreams, but no specific goals and no road map for achieving them. For people who would like to become more goal-oriented, how do you recommend they change their mindsets?

Set a goal to become a goal-setter. That’s not a play on words. Becoming a consistent goal-setter is a learned habit and, as is true with all good habits, having some kind of plan in place significantly increases the odds of success.

What habits do you recommend they adopt?

It’s the entire subject of the classic book, The Common Denominator of Success, by Albert Gray—achievers simply do the things that others will not do (make sure you understand I didn’t say the things that others cannot do).

Do you plan your day before it begins?

Have you learned how to take action without regard to whether you feel like it or not?

Do you evaluate your progress at the end of every day?

Are you engaged in lifelong learning? Daily reading of personal-development or biographical books is one example.

Do you habitually give more in value than you receive?

Most people aching to succeed but always coming up short are of the misguided opinion it’s because of some big thing they didn’t do or some big shortcoming they have. The fact is, it’s not either of those. More often than not, it’s the small things they didn’t do. It’s tied to their daily habits.

What specific steps do you recommend for getting started in setting goals?

It all begins with the “Dream.” Or what Napoleon Hill, author of the classic Think and Grow Rich, called “Desire.” He taught that desire was the beginning of all achievement, and he encouraged us to make it B-I-G. Small dreams or desires aren’t likely to motivate us.

Then create the belief that you can achieve the goal. James Allen wrote in As A Man Thinketh that, “Belief precedes all action.” Until you have the belief, you’re not likely to commit enough of yourself to the goal to overcome the obstacles that almost always appear on our way to success.

Part of creating the belief is identifying and replacing the limiting beliefs we’ve acquired through our previous programming. The ideas that we’re not smart enough, old enough, young enough or talented enough are examples of limiting beliefs.

When the two primary components are in place—the dream and the belief—the remaining steps are simple, technical components.

1. With the dream as the basis, create a specific and measurable goal that has a date for achievement.

2. Chunk the goal down into actionable steps and activities.

3. Create a schedule of the steps and activities necessary to achieve the goal.

4. Take Action! Don’t wait to act if you’re not sure of all the steps. Begin and you’ll discover many of the steps as you go. Even the poorest plan with massive action sometimes brings amazing results, while the greatest goal and plan without action yield nothing but frustration and discouragement.

5. Set up a schedule for periodic review of your effort, activity and revision of your plan. Expect that your plan will change, and don’t get hung up on the plan. You don’t turn around and go back home if you encounter a detour on the way to your vacation destination. You simply take the detour.

6. Tie the accomplishment of the goal to a reward that is meaningful and in proportion to the goal (big goal = big reward). And always claim the reward when you accomplish the goal. Otherwise, it sends the wrong message to the subconscious.

What are some strategies for achieving your goals?

Find someone to be accountable to. A trusted friend or family member who will hold your feet to the fire significantly improves your chance of succeeding.

Join a mastermind group. Not only do you get accountability, but you get the synergistic thinking of the group to help with your goal. If you’re not familiar with this concept, see the chapter that Hill wrote on this concept in Think and Grow Rich.

Find one or more mentors. There are two types of experience— your personal experience and the experience of others. It’s cheaper, quicker and less painful when you can leverage the experience of others.

What if you have one really big goal—say some specific business accomplishment you want to achieve—what do you advise?

Find someone who’s achieved the same goal or something similar. Internet research has made this so easy. Begin a study of them and their methods. If possible, figure out a way to meet them and get around them. Look for the things they did that you can copy. How can you apply your skill or your particular perspective to what they did? How can you make it new, improved or different?

This method is as old as the ancient Greeks and is the shortest route to success.

How do you stay on track to achieving your goals? How do you keep yourself from rationalizing, getting lazy and slipping off track in the pursuit of your goals?

You’ve got to go back to the dream (desire) that we talked about earlier. Hill told us that we should develop a “white-hot” desire. That’s a pretty intense desire, and the kind it takes to push us forward when obstacles and laziness present themselves.

Surround yourself with visual images of the object of your desire. Celebrated Olympian Michael Phelps talks of putting a picture of his biggest opponent on the wall of his bedroom to remind him of his desire to defeat him and claim the gold medal.

It’s even more powerful if you can physically experience the desire, like walking through your dream home or driving your dream car.

Many people battle procrastination, or think they don’t have enough information to get started, or give up if they’ve slipped off track. What strategies would you recommend that would be helpful?

Achievers don’t wait until they have all the information before they decide to do something. They know it’s only important to have enough information to make a decision and act. Since they fully embrace failure, they don’t let fear stop them from taking action on their decision.

Getting into action also increases the likelihood of maintaining action. And that’s supported scientifically by Newton’s Law of Motion: A body at rest tends to remain at rest, and a body in motion tends to remain in motion. It’s the continuing motion that creates momentum or, as it’s fondly called, the “Big Mo.”

Take one thing you’ve been putting off because you didn’t want to deal with it. Things like filing your past-due taxes, getting a physical or dental work or even cleaning out the garage. Choose some type of reward that you’ll treat yourself to when you’ve reached the goal—make sure the reward is in proportion to the achievement. Make the decision—right now—that you will take some type of action on the goal in the next 24 hours. Then act. The confidence you gain, not to mention the burden that will be lifted, will inspire you to apply the principle to other areas in your life.

Is it important to look back and review your accomplishments and setbacks? Why?

When you’re looking back to identify the lessons—the things that worked and the things that didn’t—it can be a very valuable exercise. All effective goal-setting involves some type of review and reflection.

What advice do you have for people who don’t set goals because they’re afraid they’ll come up short?

You’re coming up a lot shorter by not setting goals. Even if you set 10 goals and came up short on nine of them, you’d still be farther ahead than by not having set any.

Change your view of failure. Instead of seeing it as a final event, see it as a “feedback” event. Use the feedback to make changes in your action plan and go after it again. The refusal to see failure as final is the hallmark of champions in every field.

Top 10 Austin Foreclosure List

by Kent Redding
Top 10 Foreclosure List
Week of 12/17/08
BELOW $100,000

14402 Pebble Run Path, Manor, TX 78653

pebble
  • Near intersection of 290 and 45 toll way for quick access to north/south employers.
  • School District: Manor ISD
  • Asking Price: $95,000, 1012 sq ft. 3/2, built in 2006
  • Lease: $900/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $148
    Pro Forma Value in 5 yrs: $133,034; 5 yr ROI: 49%
    9% under recent sales comps, 6% under tax appraisal

  • 12929 White House St, Manor, TX 78653

    white
  • Easy access to Shadow Glen Golf Club, toll ways and major technology employers.
  • School District: Manor ISD
  • Asking Price: $99,100, 1422 sq ft. 3/2/1, built in 2005
  • Lease: $1000/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $197
    Pro Forma Value in 5 yrs: $148,820; 5 yr ROI: 62%
    15% under recent sales comps, 19% under tax appraisal

  • 12513 Mexicana Cv, Del Valle, TX 78617


  • Near Austin Bergstrom International Airport and new north/south toll road for easy access anywhere
  • School District: Del Valle ISD
  • Asking Price: $99,750, 1659 sq ft. 3/2/1, built in 2004
  • Lease: $1050/month, Cap Rate: 9%
  • Monthly Positive Cash Flow: $241
    Pro Forma Value in 5 yrs: $158,801; 5 yr ROI: 74%
    20% under recent sales comps, 24% under tax appraisal
  • LOW $100,000's
    12801 Wedding Dr, Manor, TX 78653

  • Easy access to Shadow Glen Golf Club, toll ways and major technology employers.
  • School District: Manor ISD
  • Asking Price: $103,000, 1953 sq ft. 4/2, built in 2006
  • Lease: $1050/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $220
    Pro Forma Value in 5 yrs: $152,047; 5 yr ROI: 60%
    14% under recent sales comps, 27% under tax appraisal
  • 4414 Magin Meadow Dr, Austin, TX 78744

  • Great location one block from Kendra Page Park. Close in location provides easy access to central Austin.
  • School District: Austin ISD
  • Asking Price: $104,900, 1426 sq ft, 4/2/1, built in 2005
  • Lease: $1250/month, Cap Rate: 10%
  • Monthly Positive Cash Flow: $364
    Pro Forma Value in 5 yrs: $134,678; 5 yr ROI: 49%
    1% under recent sales comps, 4% under tax appraisal

  • 7425 Elk Pass Dr, Austin, TX 78744


  • Located in desirable Colorado Crossing - close to jobs, highways and airport without lots of noise.
  • School District: Del Valle ISD
  • Asking Price: $109,900, 1324 sq ft. 3/2, built in 2006
  • Lease: $1060/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $149
    Pro Forma Value in 5 yrs: $152,082; 5 yr ROI: 47%
    8% under recent sales comps, 9% under tax appraisal

  • 504 HARVEST CV, Cedar Park, TX 78613


  • Good schools and easy access to new light rail station and 183 Tollway.
  • School District: Leander ISD
  • Asking Price: $111,900, 1410 sq ft, 3/2/1, built in 1993
  • Lease: $1000/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $162
    Pro Forma Value in 5 yrs: $174,557; 5 yr ROI: 65%
    18% under recent sales comps, 11% under tax appraisal

  • 6104 Perlita Dr, Austin, TX 78724


  • Near parks, good schools and north technology employers.
  • School District: Manor ISD
  • Asking Price: $199,500, 1352 sq ft. 3/2/1, built in 2004
  • Lease: $1195/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $208
    Pro Forma Value in 5 yrs: $184,632; 5 yr ROI: 65%
    17% under recent sales comps, 4% under tax appraisal

  • 6420 Tara Dr, Austin, TX 78747


  • Excellent south central neighborhood with community pool, hike and bike trails and good schools.
  • School District: Austin ISD
  • Asking Price: $119,900, 2111 sq ft. 3/2/1, built in 2002
  • Lease: $1250/month, Cap Rate: 9%
  • Monthly Positive Cash Flow: $278
    Pro Forma Value in 5 yrs: $169,737; 5 yr ROI: 55%
    10% under recent sales comps, 17% under tax appraisal
  • $120,000's - $150,000's

    5644 Brougham WAY, Manor, TX 78653


  • Neighborhood built in 2006 - 2007 so great opportunity to get new construction in great location near Hwy 130.
  • School District: Manor ISD
  • Asking Price: $139,900, 2088 sq ft. 4/3, built in 2007
  • Lease: $1300/month, Cap Rate: 8%
  • Monthly Positive Cash Flow: $207
    Pro Forma Value in 5 yrs: $186,541; 5 yr ROI: 43%
    5% under recent sales comps, 20% under tax appraisal
  • *ROI formula:
    ((Value in 5 yrs+ 5 yr net cash flow) - Purchase Price) / Purchase Price
     
    *Cash flow is assuming 30% monthly expenses

    Where's the bottom?

    by Kent Redding

    I often get questions from clients like “How’s the market?”….”Is it a good time to buy?.....”How do I know when or where is the bottom is?’…..”What can I watch?”

     

    These are all good questions.  I personally watch 3 main economic indicators when making financial decisions.  They are as follows:

     

    Check the 3 month TED spread.  This is the difference between the interest banks charge each other when borrowing from one another (known as LIBOR) and the 3-month treasury rate (T-Bill).  The wider the spread, the more cautious banks are about their lending.  Currently this number is at 3% which is far above historical levels.  A number below 1% is considered a normalized credit market where banks are comfortable making loans. Go to www.Bankrate.com and search for Libor rate and 3- month T-Bill rate.  Subtract T-Ball rate from the Libor rate.

     

    Track Real Estate home inventory.  The number of months of home inventory on the market has historically been a reliable predictor of home prices.  A 6 month inventory supply is considered in balance.  Anything above 6 months is generally considered a buyers market.  Nationally inventories are around 13 months and locally in Austin current inventory is around 8 months.  The National Association of Realtors posts this information around the 25th of each month and this can be found www.Realtor.org under research.  For local Austin inventory levels by neighborhood call me! I am happy to share that information. 512.306.1001

     

    Follow initial jobless claims. The number of NEW folks filing for unemployment benefits is released by the US Labor department each Thursday.  Currently on a national basis we are running 475K – 535K a week.  When that number starts to come down and then stabilizes below 400K that is a good indicator most of the pain could be over and the job market is rebounding.  You can find the info on the home page of the Labor Department under statistics at www.dol.gov .

     

    Now you know.

    Displaying blog entries 81-90 of 237