Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home’s purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years. Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.

Now, the IRS is developing a strategy for separating the 2009 taxpayers who are required to repay the credit from those who are not.A review by the Inspector General earlier this year found that the IRS could not easily distinguish between home purchases made in 2008 and 2009. That heightened concerns that some claims could be erroneous or even fraudulent, that buyers could, for example, claim their purchase came later than it actually occurred. Thursday’s release reported that 73,000 claims, more than 4% of the 1.8 million homebuyers who received the credit, had incorrect purchase dates recorded by the IRS. Some of the inaccuracies counted against the taxpayers, Nearly 60,000 were listed as purchasing in 2008 (meaning they had to repay the credit) or had no purchase dates at all, rather than their correct 2009 purchase dates, which would free them of the obligation to pay it back. It is also taking a look at all those deceased taxpayers who received credits.

The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.

Value lost since 2006: 15.2%

Seattle has become a world-class city with a diverse, vibrant economy. As a home to manufacturers such as Boeing and software providers such as Microsoft, the job market has held up better than average, with a current unemployment rate of 8.8%.

Home prices had a softer landing as well, dropping just 15.2% over the past three years, about half the national average. However, prices do tend to be volatile, according to Mark Fleming, chief economist for First American CoreLogic. The lack of available land for development is one reason for that volatility, as are political restrictions on growth.

After another modest price decline of 2.3% in the next eight months, the market should begin to turn up. Between June 2010 and June 2011, the city should see a gain of 6.2%. Averaged out, that means a 3.8% gain over the next two years*.

And while that may not sound all that robust for those jaded by the annual double-digit returns recorded during the boom, that performance will be one of the best of any large city during that period.

By Les Christie, CNNMoney.com staff writer

FYI: Mortgage rates at lowest point since mid-1950s.

Yale economist Robert Shiller states it bluntly: ”If you look at the trend in rents to see where housing prices are headed, you’re looking at the right measure.” Shiller is the co-developer of the S&P Case/Shiller Home Price Indices that monthly track residential real estate values nationally and in 20 metro areas.

Traditionally, people have been willing to pay a modest premium to own a home rather than rent it. Recent studies report that in 1999 rents averaged 87% of the after-tax mortgage payment for houses and condos of similar size in the same neighborhood.

When home prices took off, this percentage changed. By mid-2006, rents had fallen to less than 60% of after-tax mortgage payments. In some markets, owners were paying twice as much as renters for a similar property in the same neighborhood. In a few places, owner monthly payments were three times average rents.

The 87% ratio of rent to ownership cost for 1999 is a good benchmark because it stayed around that level throughout the 1990′s and the steep rise in home prices hadn’t really begun.

With that as our guide, we can conclude that home prices at last appear to be stabilizing. By the end of October 2009, rents on average were up to 83% of ownership costs!

Conditions vary from market to market, so check your own area. But with historically low mortgage rates, plus the homebuyer tax credit, this could be a great time to be buying or selling.

The listing service’s report isn’t the first evidence that home values in Seattle and many other central cities are holding up better than those in outlying areas.

Portland economist Joe Cortright analyzed sales data in that city, Chicago, Los Angeles, Pittsburgh and Tampa, and concluded home prices had dropped 2 to 4 percentage points more in distant suburbs than in neighborhoods close to downtown.

Zillow.com, the online real-estate marketplace and database, says its research through November indicates homes in Seattle generally have depreciated less than suburban homes since the market’s 2007 peak.

“It’s a bull’s-eye pattern — concentric circles,” said Stan Humphries, Zillow’s chief economist.

Seattle and many other central cities are faring better, he said, because many buyers are willing to pay a premium to live closer to work and such urban amenities as theaters, concerts and parks.

What’s more, Humphries said, the supply of single-family homes in Seattle is limited: There aren’t any big new subdivisions.

Neighborhoods north of downtown led Seattle’s surge. Compared with the same month last year, the median house price was up 14 percent in Northeast Seattle, 9.1 percent in Queen Anne and Magnolia, and 7.9 percent in Northwest Seattle.

“You want to have two or three months of data before you call a trend,” said Cortright, the Portland economist. “But that’s still pretty striking.”

Toni Clayton, broker at Windermere Real Estate’s Wedgwood office in Northeast Seattle, said sales in her office were up 25 percent in January. People are buying in the city because “they work in Seattle, and they want to live here,” she said.

“They don’t want to be driving a million miles to work. We’re just so tired of being stuck in all this traffic.”

High gas prices helped trigger the housing bubble’s collapse several years ago by pushing many far-suburban homeowners with long commutes into foreclosure, said Cortright. Foreclosures continue to depress home values in those areas, he said.

Home values in Seattle and other central cities also are holding up better because buyers, especially younger ones, are drawn to their “walkability,” Cortright said.

The city is attracting bargain hunters, including empty-nesters leaving suburbia, said Richard Morrill, University of Washington geography professor emeritus.

“If I wanted a desirable house in Seattle, this is the time to get it,” he said. Despite recent stabilization, the median price of a Seattle house still is down more than 17 percent from its August 2007 peak.

“Now that profit is no longer a given in people’s minds when buying a home, buyers are realigning their priorities,” Tim Ellis, editor of the Seattlebubble real-estate blog, said in an e-mail.

“They are less likely to ‘drive till you qualify’ when they realize that they probably won’t be able to sell that far-flung home in a few years for tens or hundreds of thousands more than they paid and then move to the neighborhood they really wanted to live in in the first place,” Ellis said.

The multiple-listing service reported the number of single-family homes sold in King County in January was up nearly 42 percent from January 2009, a particularly dismal month.

It was the eighth straight month of year-over-year sales increases.

Condo sales in the county were up 14.7 percent year-over-year. The median price of a unit sold in January was $267,500, down 4.4 percent from $279,750 in January 2009.

In Snohomish County, house sales in January were up nearly 35 percent from a year ago. The median price, $279,995, was down 10.5 percent.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com

The current law is extended until April 30, 2010. Buyers have until that date to have a signed purchase agreement. There is an additional 60 day grace period to complete the financing. More first time homebuyers are eligible because the new law raises the annual income limits from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples.

Current Home Owners

Over 60 percent of current home owners will be eligible for a tax credit of up to $6,500 if they purchase a home by April 30, 2010. These homebuyers must have lived in their home for five consecutive years over the previous eight years to qualify. Qualified homebuyers can get the credit if they purchase a home for $800,000 or less as their primary residence between November 7, 2009 and April 30, 2010. The income limits are the same as the First Time Homebuyer listed above.

FAQ

NEW YORK (CNNMoney.com) — President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday. The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June.

Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.

The bad part: It ends on Dec. 1.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.

“Buyers have to get a home under contract very, very soon,” said Tom Kunz, CEO of Century 21. “They probably should get out looking.”
Sense of urgency

What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range. (Check prices in your city.)

In Whittier, Calif., for example, there are few repossessed homes for sale. Those are easy to buy because there isn’t a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe.

“That’s why there’s such a sense of urgency now,” said Irma Tapper, a Century 21 real estate agent in Whittier. “The banks have to approve short sales, and they’re taking three to six months to do that.”

That means a first timer putting a bid on a short-sale might not get an answer form the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy.

Chuck Whitehead, who runs the Coldwell Banker agency in Temecula, Calif., said one recent listing hit the market on a Friday and by Monday there were 57 bids.

The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn’t have been able to buy without it.

“It makes a big difference because most of these clients are in a lower price range,” said Michelle Edmunds, an agent with Coldwell Banker in Temecula, Calf., who has closed sales for six first-time buyers. “The houses they buy need work and normally they wouldn’t want to move in because of the [less than perfect] conditions the homes are in.”

That is true for Wesley Forsythe. This June, the 30-year-old computer consultant and his girlfriend bought a row house in the Fishtown section of Philadelphia. Since he paid just $80,000 for the three-bedroom, two-bath place, the credit acted like a 10% discount.

“It allowed us to expand our price range and plan additional renovations,” he said. “My mortgage is several hundred dollars less than what my new rent would have been.”

Forsythe applied for the credit immediately after closing, filing an amended 2008 tax return. The IRS cut him a check in less than seven weeks. He’s spending it now on new hardwood floors, repainting most of the interior and renovating a bathroom. He’s stretching the cash by doing much of the work himself.
Cash for Clunkers effect

Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.

In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program.

“It’s just like Cash for Clunkers,” said Robert Dye, a senior economist for PNC Financial Services Group. “It runs the risk of a let-down as the program runs its course.”

Johnny Isakson, R-Ga., who is a former real estate broker, is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions.

The effort has drawn strong industry support.

“We need to stimulate the move-up buyer,” said Century 21′s Kunz, “so it works its way up the pricing food chain. That’s what we need to get inventory moving again.”
By Les Christie, CNNMoney.com

http://seattlecondosandlofts.com/images/Brix_Gallery_release.pdf

Real-estate contracts have grown lengthier. And new potential problems — such as your home turning out to be a former meth lab — have emerged. As a result, many home buyers and sellers may not have all the information they need to make sure their rights are protected, says Adam Morrow, a lawyer and real-estate agent with Sound Counsel Realty in Seattle.

“Basically, people get into trouble because they rely on real-estate agents for legal advice, which they’re not qualified to give,” he says.

These are some of the most common legal snarls that entangle home buyers and sellers.

The liability box. Home-sale contracts have a form called the Real Estate Transfer Disclosure Statement. Otherwise known as Form 17, this page has a very important little box. If a seller checks the box, they agree the buyer can sue them if they later discover a problem. If they leave it unchecked, the buyer can’t.

It’s a critical item that sellers and buyers should negotiate on, says Marc Holmes, a broker and a lawyer at Craig Blackmon in Seattle. When he’s advising buyers, he tells them to make sure it’s checked; sellers, he advises to leave it unchecked.

“No” vs “don’t know.” Seller-disclosure forms list possible house problems, from rats to septic trouble. The choices are to say “yes,” “don’t know” or “no,” meaning the seller knows the problem doesn’t exist. Many sellers check “no” as it seems more reassuring to buyers, even if they don’t really know. But the “no” answer opens the door to future lawsuits if a problem is found later.

Look at the title report. If a title report references other documents, those documents need to be read, even if it takes some sleuthing to find them.

Morrow worked for one prospective homebuyer who wanted to purchase a Bainbridge Island property. The title report indicated a release had been required when the home was built. Digging up that release revealed that the builder was required to sign a liability waiver because the property was a known landslide area.

“If we hadn’t looked at this aspect, he probably would have bought it,” Morrow notes, “and ended up with a home that eventually would slide down a hill, or might be unsalable.”

Inspect carefully. A typical home inspection isn’t thorough. It won’t check the health of your septic system in some counties, for instance, and inspectors may not even crawl under the house. Hire a highly experienced inspector, let them know you want a detailed inspection and listen carefully to what that person tells you, Holmes says.

If you have any doubts, get another home inspection or conduct additional tests. Ultimately, buyers often don’t have a good legal claim against a seller because their problem is something the buyer should have found on inspection.

Bank-owned. When a bank owns a property, there’s no seller to disclose information about problems with the house. Be aware that banks sell property “as is, where is,” says Holmes, and make sure your inspection is very comprehensive. Don’t be in a hurry to grab a bargain.

New construction. New homes and condos lure buyers into a sense of false security that everything must be fine, and they tend to gloss over the inspection, says Holmes. Note that builders sell things “take it or leave it” and often have complicated sale contracts that greatly limit their liability, so be sure to read closely before you sign.

“The number of condo-construction defect cases filed each year,” Holmes notes, “is truly amazing.”

Double-check descriptions. Properties are sold with a precise, legally binding description provided by the title company, which spells out its exact location and size. But often, a vague description or just a street address is entered instead — and the next thing you know, you haven’t purchased exactly the property you wanted. Holmes says incorrect descriptions spawn many lawsuits.

Copyright © 2009 The Seattle Times Company