“Can you get the $8000 tax credit for first time home buyers on a contract for deed sale? “

Contract for deed means the buyer allows the seller to retain title of the property (after the purchase) in exchange for a smaller down payment or other concessions. As long as the buyer makes regular payments, all is well but should he or she miss one payment, they risk losing the property since the seller retains title. It’s sort of like paying rent, and having that rent credit your equity.

As far as this new $8000 taxpayer deal,  I have to ask the experts for help.

Experts can you please chime in?

One, I cannot believe how archaic the process is. A bunch of hot people standing outside the George Allen Courthouse, lawyers in suits  (low wool content, I hope). We could have used chair massages and Slurpee’s, and where’s the potty? At first we went to Lew Sterrett Frank Crowley, I pulled out the Handi-Wipes, but was re-directed to 600 Commerce after passing my handbag through the metal detector. Veterans tell me that folks didn’t like being at Lew Crowley for obvious reasons. So we get to 600 Commerce and like a sidewalk fair, everyone is  standing outside under the overhang, where I stayed remarkably comfortable for a July day in Texas. (Note to Dallas County: exterior ceiling fans.)  A few people did stop and ask if this was a fair or something. It was hot, but could have been worse.  Pity the poor trustee  who was off next to Tarrant County’s auction — it is held on the west-facing courthouse steps, outside, no overhang.

Foreclosure attendees consist of four basic food groups: newbies, like me;  investors (serious), also known as vultures; bank reps — I learned many of the banks buy back their own properties so they can re-sell them; people desperately trying to save their homes. The atmosphere is almost camp-like, since the savvy bring coolers and those fold-able camp chairs — one trustee even had a camp battery pack and fan. Paperwork is kept in rolling file cartons a la the Container Store. The American Dream is in full force — one person’s loss is another’s bargain.  Most folks are dressed casually save for the few dedicated attorneys in suits who stand out like hot, sore thumbs, but at least you can see them as they read off their prepped legal docs — same verbiage, different debtor: “Whereas on August 12, 1999, Michael Jackson, a single man, executed a deed for the sum of $500,000 in Dallas County…”  You cannot hear  very well as the buses, planes and sirens are out-screeching  words, so everyone leans in close, creating a huddle around each trustee. I saw one bid start at $80,000, the home sold for $214,000. (Interesting, the guy waiting to about $150K to jump in.) The bidding on some properties  started at a dollar. One Lakeridge property owned by Bank of America started at $24,650, and I wrote about a four million dollar property out there. Someone cleaned house on a $5 million dollar downtown commercial property they snagged for $3 million. The blood thirst for bargains was thick: I was back at the silent auction table at a charity fund raiser where an aggressive broad planted herself in front of the sign-up for lunch with Nolan Ryan at The Ballpark, or at Filene’s Basement with La Perla fifty cents a pair.

To do this right, you need a mentor, and mine was Virginia Cook’s Kyle Rovinsky, a D Best Realtor, and foreclosure auction vet. We wanted to be “in the pit” by ten a.m. and almost were save for the Lew Sterrett detour. The good folks at KERA were there filming a special on mortgages and foreclosure that runs July 21 –I chatted with the delightful BJ Austin and helped them find “who was in charge.” That was an excellent question, actually, because at the forclosure auction it seems that no one is in charge. You must buy the foreclosure list from Roddy’s Foreclosure Listing Service, Inc. to even know what is for sale,  who the trustee is, although a new company, Lone Star Foreclosures, is coming to cover Hunt and Smith Counties: one person’s poison is another’s paradise. Veterans buy the list days ahead,  (this month’s was about 136 pages long) scrutinize and organize it into the properties of interest. The trustee doesn’t just shout out the street address. They call the legal property description,  lot and block number, so you really have to know what you are looking for.  The Roddy’s people put name tags on the trustees — lawyers who work for the banks or mortgagors — and would occasionally shout out the name of the trustee for all to hear. No megaphones, no microphones, and a few lenders will send out a cameraman to document the process.

As for the people, they ranged from the pros working for real estate investment companies to individuals, like the woman and her family who have been buying foreclosed properties for 30 years. She was the one out-bid by a man on an east Dallas property she told me was owned by an older Vet who had fallen behind on his payments — she wasn’t sure what she would have done with the home had she bought it, but she was out-bid so the issue was moot. Though the banks will start bidding at a dollar, they will not let the property out the door at that price. Once the bidding starts, a bank rep will bid it up. You can pick up some real dogs if you don’t know what you are doing — these properties, one veteran told me, sell “as is” and unless you’ve gotten title work you could turn around and have to pay out thousands in unpaid liens, property taxes, not to mention repairs. That’s why you really need the list early  and need to research the properties.  Also, many homes on the list never make it to the auction, like 3616 Beverly. People make midnight deals — even 9:00 a.m. deals — with the lenders to save their home. I was told of a local home builder who has been “saving” his properties the night before every auction now for six months. Still, one expert told me that a smart buyer can pick up a home for 30% less — he strongly suggests that if you have your eye on a property, go ahead and pay for the title work prior to the auction.

I met one young eager investor who started buying buying foreclosures one year ago — 50 units. He put in about $15,000 in repairs and sold for a profit. But this is such a depressing market, I said. Not so, he said, this is when you make money, when the market is down. Quit listening to the media. But what, I asked, what if it NEVER comes back, at least not for a very long time? Doesn’t matter, he said, as long as you buy it right. There is this thing called seller financing.

Real estate, he said, is very much like poker: matters not the cards you are dealt, it matters how you play the game.

Candy, I didn’t realize there was this $8,000 credit for buying a home.  I’m seriously considering it.  I just don’t know enough about what things cost and what neighborhoods I might like, which is why I enjoy reading DallasDirt.  I guess we’ll need a Realtor to show us around but — they scare me. Will Realtors work with small potato clients like us? – SR”

Realtors scary? Actually, dear agents, there is a perception that if you are not Mr. and Mrs. Gotrocks, you are not worth a sneeze, much less sale. But this email, from a local young professional, is exactly why I am bullish on our local (read: affordable) market.  Here’s the deal: these young kids are working and busy. They Twitter and Facebook and still find time to volunteer at the SPCA. It won’t take long before they learn, over the water cooler, that Uncle Sam is gobbling their paycheck and owning a home may help out.  Inch by inch, these kids will be getting into the market, even though the toughest thing about buying your first home is scraping up enough dough for the down payment.  As of May 29, first time home buyers can fashion that $8000 tax credit into their down payment and to help with upfront home buying costs.

Some of us used to look in the newspaper for financial information, like ads on mortgage rates. Well those days are gone because mortgage rates can now change up to five times a day.  As The Mortgage Reports tells us, you’d do better to follow rates through Twitter. Take-away: pre-qualify for your mortgage loan, and get the best possible rate by asking your lender to send you rate changes on Twitter.

I ask you: what price range home can you afford with $7500 a month?�

“Regardless of political mudslinging, the crux of the discussion is this section
“Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a
conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes
his or her monthly payments on time for two years, the one percentage point premium is dropped.”

So Candy, how many of the current defaulters used that program? I am sincerely asking the question. Is it 1% of the current defaulters, 10%, 50%, 0%? What is it?

Don’t go pointing fingers without having some answers.”

Anyone have the answers?

A -$8000 tax credit for first-time buyers, l like very much. Assuming this will work like a section 179 deduction and come right off the taxes, not add 5 more pages or 6 hours of CPA billable hours to the tax return, essentially using tax dollars to help fund the home purchase. 

F- Revamping U.S. bankruptcy rules, giving judges the power to reduce mortgage payments and set lower interest rates. Excuse me, but I think part of our problem was that banks got too big, unregulated and complex. So now we are going to let judges play banker? This will slow down lending and banks will have to recoup their losses from somewhere —charge more to the customers who pay their bills, or higher PMI or PMI for everyone or higher interest rates.

Not fair, folks.

C – The government will match reductions lenders make to keep borrowers home payments at 31% of their income. What income — stated income? Does that include alimony?

Incomplete – Flushing Fannie Mae and Freddie Mac with $900 billion.

It now appears the economic stimulus bill will deliver be some significant benefits to those wishing to purchase or refinance a home. These include:

Ø A true first-time homebuyer tax credit in the amount of $7500 available for a qualified purchase of a principal residence between January 1 and September 1, 2009. I say “true” since, this time, the “credit” will not have to be repaid by the homeowner!

Ø FHA, Fannie and Freddie loan limits will be revised. While specifics have not been released, reports indicate the 2008 limits will be reinstated for 2009 with certain limited exceptions.

Ø Foreclosure mitigation and neighborhood stabilization is forthcoming. In essence, this means that there will be some as-yet-undetermined method for funding state and local efforts to abate foreclosure and stabilize and redevelop neighborhoods. of abandoned and foreclosed homes are authorized.

My daughter recently attended a first-time home-buying seminar sponsored by Virginia Cook’s Ed Murchison and Beverly Bell, and Shelter Mortgage. She learned that loans are available for young people like herself for as little as 3.5% down, that you need 6 months worth of mortgage payments in the bank for an economic safety net, and that the $7500 deduction for first time home buyers will increase to $15,000 in the new economic stimulus package — details are forthcoming. Pork city! Clearly this stimulus package wants to get the young people into homes solidly, and I am glad someone is offering sound advice. Too bad seminars like these are not required for every first time homebuyer.

Call me Bob Shiller, who thinks every American family ought to have a personal financial adviser paid for by the government. Let’s see, no mortgage deduction, free health care, a free financial adviser on Uncle Sam’s tab, will there be any money left in our paychecks?

Do you think the mortgage deduction in the U.S. encourages over-consumption? Is that deduction sacrosanct or heading for oblivion or… heading for a one-time offer?