Grayson Hodge

News reports that the federal government is backing away from its plan to permit eligible borrowers to monetize the first-time homebuyer tax credit are off the mark, a spokesperson for the U.S. Department of Housing and Urban Development says.

"The technical details are still being finalized and will soon be published in a mortgagee letter and posted on our Web site," Lemar Wooley, a HUD spokesperson, told REALTOR® magazine Wednesday afternoon.

Under the guidance that's under development, state agencies and other HUD-approved entities would be able to provide short-term bridge loans that households could use to help with their downpayment. The loans would be repaid with the proceeds from the households' federal tax credit.

The loans were announced on the opening day of NAR's 2009 Midyear Legislative Meetings in Washington, D.C., last week. In his announcement, HUD Secretary Shaun Donovan said guidance would be issued shortly.

When the guidance is released, it is expected to cover eligible lenders and set parameters for loan terms and repayment.

Source: REALTOR® Magazine Online

Market for International Real Estate Services
Some of the components of demand for international real estate services include the following: relocations into and out of the U.S. by both domestic and foreign transnational companies; U.S. retiree purchases overseas; immigrant home purchase inflows into the U.S.; immigrant purchases of commercial or business properties in the U.S.; foreign investor purchases of U.S. real estate; and U.S. investor purchases of foreign real estate.

Inbound Movements: Foreign direct investment (FDI) in the U.S. increased 8.5% from 2003 to 2004 to $1.53 trillion. FDI position in U.S. real estate rose 4.7% from 2004 to $37.9 billion. FDI in U.S. real estate accounts for 2.5% of total foreign investment in the U.S. market, with significant anecdotal evidence projecting a higher level of foreign participation in 2005.

Outbound: Statistics from the Association of Americans Resident Overseas indicate that excluding Military personnel, over 4 million Americans live in over 150 countries overseas. Besides corporate employees, other major components of this group included educators, students and retired persons. A major international consulting firm estimates that this translates into approximately 200,000 corporate relocation housing orders annually.

Immigration - Residential: Foreign immigration into the U.S. in the 1990s was the highest since the wave of Eastern European immigration at the end of the 19th century. Over 18 million immigrants arrived since 1990, contributing almost 50 percent of the overall U.S. population increase.

Foreign-born purchases of residential real estate are expected to rise steadily from the significant increase in immigration. Nearly half of the recent increase in the overall U.S. population is due to newly arrived immigrants. Given the strong relationship between rising homeownership rates and the length of time in the U.S., home purchases by immigrants will have a sizable impact on the housing market for the foreseeable future.

The homeownership rate rises rapidly the longer an immigrant remains in the U.S. The homeownership rate is about 18% for immigrants who came to the country in the last five years; but is 78% among those who arrived more than 30 years ago. NAR estimates that more than half of all first-time homebuyers will be of minority households (Hispanics, blacks, Asians) in the next ten years. In fact, nearly 300 million immigrants are expected to reach U.S. shores between 1999 and 2100. These immigrants represent a staggering long-term business opportunity for REALTORS® both in the U.S. and--through referral fees--for practitioners abroad.

Demand for international brokerage services: Recent research indicates that foreign purchases of U.S. real estate in 1999 were on the order of $862.7 million, while U.S. purchases overseas were more than $652.4 million. Cumulatively, U.S. investments overseas amount to more than a trillion dollars, and foreigners have invested nearly a trillion dollars in the United States. A significant portion of each of those numbers - no one knows for sure just how significant but an educated guess might be 15 percent - is real estate investment.

International Real Estate is not just a niche industry, but is integrated into all sectors of the real estate business and is a significant means for growing your business. NAR International seeks to render the global market accessible to and profitable for REALTORS®, and offers a wide variety of programs and services to help REALTORS® succeed in the international arena within your local market. Read More

And the latest development on the First Time Homebuyer Tax Credit, announced Tuesday at the mid-year NAR meetings in Washington, D.C., is the ability for the buyer to access the credit at closing as downpayment funds.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.

"We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at "The Real Estate Summit: Advancing the U.S. Economy," at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington , D.C.

He says FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

What Qualifies as a Purchase?

Any home purchased by an eligible taxpayer as their personal residence and located in the United States qualifies for the credit. For this purpose, a home in a U.S. territory is not considered located in the United States. Thus, ownership of such a home would not disqualify a taxpayer from claiming a credit for the purchase of principal residence within the United States.

The home must be purchased after April 8, 2008, and before December 1, 2009. For most taxpayers, they are considered to have finalized the "purchase" at the time of closing. However, for a home constructed by the taxpayer, the purchase date is considered the date the taxpayer first occupies the home.

Caution:

Because the purchase of the home must be finalized, the first-time homebuyer credit cannot be claimed in anticipation of a future purchase. This effectively precludes a taxpayer from using a refund from the credit as a down payment.

Example: 4

Jack is single and qualifies for the first-time homebuyer credit when on January 15, 2009, he purchases a home with Kate who is not first-time homebuyer. If Jack and Kate marry later in the year, Jack may still claim the maximum amount of credit as eligibility is determined on the date the principal residence was purchased.

Purchases of vacation homes and rental property do not qualify for the credit. However, if the home purchased by the taxpayer is their principal residence, then he or she may rent out a portion to another person (for example, two bedrooms) so long as the rental income is reported on Schedule E of the taxpayer's return.

Credit Exceptions

In addition to failing to meet the requirements to be a first-time homebuyer and purchase a principal residence (as well as the modified AGI limits), an individual may not claim the first-time homebuyer credit if he or she:

􀁺 purchases the home from a close relative, including a spouse, parent, grandparent, child, or grandchild;

􀁺 sells the home before the end of the year

􀁺 is a nonresident alien;

􀁺 is (or was) eligible for the District of Columbia first-time homebuyer credit (only for homes purchased in 2008)

􀁺 receives home financing from tax-exempt mortgage revenue bonds (only for homes purchased in 2008)

In the several weeks that Realtors have been dealing with the new tax credit that recently was approved by Congress, a number of questions have arisen quite naturally as to special circumstances with buyers and their unique situations. These questions have been posed to the IRS for answers and they have quickly responded.

A few pertinent answers and explanations follow as taken from the IRS News Tax-Bulletin, Issue 9:

First-Time Homebuyer

An individual is considered a first-time homebuyer if they have not owned and used another personal residence at any time during the three years prior to the date of purchase.4 For example, if a taxpayer purchases a principal residence on July 1, 2009, then he or she cannot claim the credit if they owned, or had an ownership interest in another principal residence at any time from July 2, 2006, through July 1, 2009.

Comment:

Ownership and use of a principal residence outside the United States within the last three years does not disqualify the taxpayer from taking the credit.

Example: 1

Juliet owned her own home and used it as her principal residence. Over three years ago, however, she decided to rent an apartment closer to her work. She did not sell her home, but instead rented it out to tenants. Now, Juliet plans to buy another home and use it as her principal residence. Even though she already owns a home, she has not used it as her personal residence within the past three years. She qualifies as a first-time homebuyer eligible for the credit.

Example: 2

Hugo is single and qualifies for the first-time homebuyer credit. His father, David, does not qualify as a first time homebuyer. However, David cosigns for Hugo's purchase of a new home in 2009. Both Hugo and David's names are on the mortgage. If Hugo uses the home as his primary residence, then he may claim the entire credit of up to $8,000. David cannot claim any portion of the credit.

For married couples, neither spouse can have an ownership interest in a principal residence within the past three years to be eligible for the credit. It does not matter whether the couple files a joint return or separate returns.

Example: 3

Chuck and Ellie want to sell their current home and purchase a new principal residence for their growing family. Ellie has owned the couple's current home since before they were married five years ago. Chuck has not owned a principal residence within the prior three years (including the current home by changing the title to both spouses). Nonetheless, Chuck does not qualify as a first-time homebuyer since Ellie had an ownership interest in a principal residence within the prior three years.

Because the first-time homebuyer credit is fully refundable, the fact that a taxpayer does not have any income tax liability or has income exempted from tax, will not preclude eligibility as a first-time homebuyer. A person with no taxable income who otherwise qualifies may file a return for the sole purpose of claiming the credit for a refund.