Realty World – Innovative Realty Service

How to buy a foreclosure
Many buyers, especially first-timers, hope to purchase a foreclosed property at a bargain price.  While purchasing a foreclosed home can be a wise choice for some buyers, it is important that buyers understand the differences in buying at different stages of foreclosure and be prepared to take on the challenges typically associated with each.
MAKING SENSE OF THE STORY FOR CONSUMERS

There are three basic stages of foreclosure in California: Pre-foreclosure, trustee’s sale, and repossession, often called an REO or real estate owned by the bank.
Pre-foreclosure homes are in the foreclosure process, but have not yet been auctioned.  Owners of pre-foreclosed homes often try to sell the properties because they are “underwater,” meaning they owe more on the mortgage than the home currently is worth.  Many homeowners attempt to sell via short sale, where the lender must agree to accept less than the amount owed on the mortgage.  Buying at this stage of foreclosure often is a complicated and slow process. However, buyers of pre-foreclosed properties often are given the opportunity to inspect the home prior to purchasing, whereas this is not always the case when buying at other stages of foreclosures.
The second basic stage of foreclosure is the public auction at a trustee’s or foreclosure sale.  Homes in this stage often are well priced, but also come with challenges to buy.  These homes may not be available for inspection and buyers may later discover the property needs numerous repairs.  As a result, many of the homes at auction are purchased by investors and contractors who have experience working with homes needing numerous repairs, or taken back as REO by the foreclosing lenders.
If a home does not sell to a third party at the trustee’s auction, the bank takes the property (REO Property)–the final stage of the foreclosure process. Although homes in this stage typically do not offer buyers the best prices, buyers generally can perform a thorough inspection of the property prior to closing.

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I found this through a CAR posting. This very easy to follow chart clearly defines how a Home Buyer may qualify for the California State and Federal Tax Credits. Please review this link:
Homebuyer Tax Credit Chart 2010.
This chart was provided by CAR

A new national survey gauging attitudes toward housing finds that two-thirds of Americans (65 percent) still prefer owning a home, despite the challenging economic environment and the housing downturn. The Fannie Mae National Housing Survey, conducted between December 2009 and January 2010, polled homeowners and renters to assess their confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.
The survey revealed that homeowners and renters alike are taking a more cautious approach to homeownership. Nearly a quarter of renters polled (23 percent) said they will buy a home later than once planned. In addition, Americans with traditional, fixed-rate mortgages with predictable payments are significantly more satisfied than those with other types of mortgages. Respondents cited non-financial reasons such as safety (43 percent) and quality of local schools (33 percent) as driving factors in wanting to own a home, ahead of financial considerations.
A majority of consumers (60 percent) believe that buying a home today is harder than it was for their parents, and nearly seven in 10 (68 percent) think it will be even more difficult for their children. Most respondents (88 percent) also believe that walking away from an underwater mortgage is not acceptable, but those who know someone who has defaulted are more than twice as likely to have seriously considered stopping payments on their mortgage.
More info
This article was provide by CAR.

On March 25, 2010 Governor Schwarzenegger signed AB 183 providing $200 million for home buyer tax credits.  The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.
This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).  Buyers also must be at least 18 years old and be unrelated to the seller.  First-time buyers are defined as those who have not owned a home in the past three years.
To learn more about the California Home Buyer Tax Credit, click here.
This Article was provided by CAR. As I am not a tax professional, please confer with your CPA or other tax advisor about how this California tax credit may affect your next home purchase.

You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here’s what you have to do to get your benefit:

Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.
 Decide whether to: 

apply the credit to your 2009 tax return, filed on or before April 15, 2010;
 file an amended 2009 return; or, 
apply the credit on your 2010 return, filed on or before April 15, 2011.

      3.   Attach documentation of purchase to your return.
When to Apply the Credit
Buyers purchasing in 2010 will have the option to:

 Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
 File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
 Claim the credit on their 2010 tax returns.

Applying the Credit to Your 2009 Taxes
You will need to do three things to claim the credit on your 2009 tax return:

Fill out Form 5405 to determine the amount of your available credit;
Apply the credit when you file your 2009 tax return or file an amended return;
Attach documentation of purchase to your return or amended return.

How do I obtain an IRS Form 5405?
Go to: http://www.irs.gov/pub/irs-pdf/f5405.pdf
How to Apply the Home Buyer Tax Credit to your 2009 Return
To claim the credit as part of your 2009 return, you will need: The standard Form 1040 and Form 5405 for the home buyer tax credit.

First begin Form 1040.
Be sure to take note of your adjusted gross income, which you enter on lines 37 of the form. Form 5405 actually requires you to note your modified adjusted gross income, but that affects few people, so most will just use their adjusted gross income.
When you come to Line 69 you’ll be asked to enter your tax credit amount. To do that, you’ll need to first complete Form 5405. 
Once you complete Form 5405, enter the amount on Line 69, then complete your return.
Attach Form 5405 to your return.

Collecting Your Refund
Any refund for which you qualify will be sent to you.
Determining Your First-Time Buyer Credit Amount: Form 5405
Regardless of whether you’re applying the first-time home buyer tax credit on your 2009 return or your 2010 return, you’ll need to visit the IRS Web site and download  Form 5405:  http://www.irs.gov/pub/irs-pdf/f5405.pdf . This form has just six lines and takes only a minute to complete. 

On the first line enter either $8,000 or 10 percent of the home purchase price, whichever is smaller. Since the national median home price is around $175,200 (March 2009), in most cases the $8,000 will be the smaller of the two. In order for 10 percent of the home price to be smaller, the home purchase price would have to be $79,999 or less. 
On the second line enter your adjusted gross income. You will find your gross adjusted income on line 37 of Form 1040, which you submitted when you filed your 2008 return. The tax credit form actually requires you to note your modified adjusted gross income, but that affects few people, so most will just use their adjusted gross income.
If your adjusted gross income is more than $75,000 (individual) or your income is more than $150,000 (joint) you’ll have to complete some additional calculations to determine the credit amount for which you qualify.
Everyone else will simply enter the tax credit amount on Line 6.

The information in this Blog was condensed from a recent NAR article. Please do not consider this article as income tax counsel and please verify the above information with your CPA or other Tax Advisor.