Archive for the 'Legislation' Category

Minneapolis Duplexes Make Like The Roadrunner

said on January 2nd, 2013 categorized under: Legislation


A Real Roadrunner

A Real Roadrunner

Whew. Real estate didn’t go over the fiscal cliff.

Just like the Roadrunner, a last minute Congressional dash helped avoid what could have been a disaster, when late yesterday, the U.S House of Representatives passed the Senate’s legislation to avert any further damage.

What this means to people who own or are selling real estate is:

  • Mortgage debt cancellation, which was a non-taxable event under the “American Taxpayer Relief Act of 2012”, will be extended. In other words, if you sell your property as a short sale or lose it to foreclosure, you may not be taxed on the debt forgiveness. (Duplex owners should consult with their tax professionals, as part or all of your debt forgiveness may, in fact, trigger tax consequences.)
  • The capital gains tax rate will remain at 15 percent for most households. Anyone earning more than $400,000-450,000 a year, however, will pay a rate of 20 percent.
  • Taxes for gains on the sale of a principal residence of up to $500,000 for married couples and $250,000 for individualts remains in effect. Only homesellers who earn more than than $450,000 a year may face tax consequences on the sale of their homes.
  • The tax deductions for mortgage insurance pemiums and state and local property taxes have been extended.

This is good news for a still recovering real estate market.

Can Minneapolis Duplex Market Survive Without The Tax Credit?

said on September 18th, 2009 categorized under: Legislation


Hourglass. The sand falls forming the dollar sign.As the sand in the hourglass of the $8000 first time home buyer tax credit begins to run out, an article in the New York Times this week reported there are doubts that the housing market can function without it.

The Times article estimates that as many as 40 percent of all home buyers this year qualify for the credit. In fact, the National Association of Realtors estimates the credit is responsible for 350,000 in sales this year alone. Moody’s, however, is still more optimistic, putting the figure at 400,000.

Evidence to support this may be found in the fact that mortgage applications for the week ending September 3, showed the largest gain since early April.

Home builders and the National Association of Realtors want Congress to extend the tax credit through at least next summer. The groups are suggesting the program be expanded to $15,000, and the credit granted to all buyers.

Republican Senator Johnny Isakson of Georgia, the sponsor of the original Senate bill, is working on just that. Isakson is submitting a new bill that would give a maximum $15,000 tax credit to any buyer who stays in the home for at least two years.

A former Realtor, Isakson accurately states that “The problem now is not first-time buyers, it’s the move-up market…”

Don’t hold out for the $15,000 credit, however. Washington, being the contentious place it is, is sure to hotly debate any additional stimulus package. If a new housing tax credit is passed at all, expect it to be a watered down version of Isakson’s original idea.

Eight Ways to Paint Your Minneapolis Duplex Green

said on August 3rd, 2009 categorized under: Legislation, tax credits


Environmentally firendly houseIt’s not easy going green.

Oh, we all know there’s a push to do it. But let’s face it. It’s downright expensive. Where are you going to get the money?

Well, thanks to a salad bar full of recently passed and pending green legislation, it will soon be easier to finance these projects than ever.

Let’s start with the green opportunities already available to Minneapolis duplex owners:

  • Energy Efficient Mortgage (EEM) -Already in place, this FHA-backed mortgage allows a buyer to purchase or refinance a principal residence of one to four units and incorporate the cost of energy efficient improvements into the mortgage. Best of all, the borrower does not have to qualify for or make a down payment on the additional funding.

The energy efficient improvements must be cost effective. In other words, you have to prove the cost of the improvement is less than the total value of the energy it will save you over its useful life.

As part of the American Clean Energy and Security Act now before Congress (more widely heralded for it’s cap-and-trade” carbon emmissions program), proposed additional incentives include:

  • The FHA would directed to insure a mimimum of 50,000 new Energy Efficient Mortgages during the next three years, with the definition of an energy-efficient house being one where energy consumption is reduced by 20 percent after renovations.
  • Freddie Mac and Fannie Mae would be required to increase the qualifying incomes of mortgage applicants by at least one dollar for every dollar of projected energy savings from efficient design, green construction or renovations. (Think of this as somewhat like being able to use 75 percent of a property’s rental income to help you qualify for a loan to buy it; except this is dollar for dollar).
  • Loan applicants who live close to mass-transit lines or employment centers would receive similar concessions on their qualifying incomes.
  • Appraisers would be required to consider energy improvements as part of a duplex’s appraised value.
  • State governments would ensure property owners who go “off grid” by no longer using utility companies to provide power are not denied property hazard insurance.


moneyWhile things seem to be heating up in the Twin Cities duplex market, some states are cranking up the thermostat even further by implementing bridge-loan programs that advance first time home buyers the cash they need to purchase a property.

For all intents and purposes, the loan acts as a second mortgage that becomes due whenever the buyer of the property receives their first time home buyer tax refund from the IRS.

I have encountered numerous credit-worthy first time borrowers out there. However, many do not have enough money saved for the minimum 3.5 percent FHA down payment requirement. While parents have always been a resource for many first time home buyers, many parents have seen their availability of extra funds shrink with their 401(k).

States that have created some variation of a down-payment loan program are: Missouri, Colorado, Delaware, New Jersey, Tennessee, Idaho, Washington, Ohio, Pennsylvania and New Mexico.

While I have not heard of an equally innovative program in the works for Minnesota residents, it never hurts to suggest one to your representatives in the state legislature.

Minnesota Legislature Offers to Prolong Housing Crisis

said on April 23rd, 2009 categorized under: Legislation


minnesota state capitalIn the midst of the greatest housing crisis in U.S. history,  Representative Ann Lenczewski has introduced a bill to the Minnesota House of Representatives that’s sure to prolong the pain.

HF2323 is a measure intended to address the state’s looming budget shortfall.  It seeks to reduce spending and raise taxes in order to balance the budget.

But guess where that tax revenue is going to come from?

Your property and more directly, your wallet.

The House Tax Plan raises revenue by eliminating three major real estate tax deductions: the Mortgage Interest Deduction (MID), Real Estate Property Taxes and the Relative Homestead Tax.

For decades, home and duplex owners have been able to deduct a sizable amount from their income taxes due to the interest paid on their mortgages. The House Bill replaces this deduction with a maximum “housing credit” of $420, or 7 percent of up to $6000 in mortgage interest paid. However, no credit is applied to the first $4000 of interest paid.

As a result, a property owner must pay $10,000 in mortgage interest to qualify for the full $420 credit.

Dumb enough? Wait. It gets better.

Since 1933, the tax code has allowed taxpayers to deduct property taxes from their income. HF2323 eliminates the deductibility of property taxes.

Finally,Lenczewski says in an effort to thwart parents from buying homes for their college students, the bill contains a provision eliminating an owner’s ability to qualify for homestead property taxes when a relative resides there.

Personally, I didn’t know buying houses for your kids to live in while in school was such a nuisance. (Yes, I’m being sarcastic. )

Of course, none of this will help stimulate a housing recovery in the state. In fact, it’s likely it will only prolong the crisis.

Contact your representative and let them know how you feel.

1 Comment »

splashing in puddlesAs the mud settles in the puddle of the first time home buyer tax credit, some of the cloudier issues have begun to clear. 

The other day a reader asked me to point him to actual documentation that an owner occupied duplex qualified for the first time home buyer tax credit.

He also asked whether he was inferring correctly from IRS literature that he could only take half the purchase price of the duplex and use that as the basis for the tax credit.

Well, I’ve polled some accountants and it’s unanimous.

Melanie Schlomann at Abdo, Eick & Meyers LLP says of the type of property, “The important point is it has to be a main home.” She directed me to the definition of “main home” found on IRS Form 5405 which reads:

Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, house trailer, cooperative apartment, condominium, or other type of residence.

“The form instructions for the credit specifically state the credit is available for any first time home buyer purchasing their ‘main home” she adds. “There is no specific clause that states the answer. Many tax laws are open to interpretation and from what I read, a small multi-family residence would qualify”. 

Read the rest of this entry »

Yes We Can! Home Buyer Tax Credit May Change Again

said on February 13th, 2009 categorized under: Legislation


rolling 02I don’t know about you, but I’m starting to get dizzy. 

The Atlanta Journal-Constitution  is reporting that the $15,000 home buyer tax credit, which was replaced with a reduced first time buyer tax credit in the economic stimulus package may not be dead yet.

Our hero, Georgia Senator Johnny Isakson, who sponsored the $15,000 tax credit amendment in the Senate’s version of the package told the Atlanta Journal-Constitution he will continue to push for it in a standalone bill. 

Isakson said, “Quite frankly, there is so much outward support for what we did…that I wouldn’t at all be surprised if you didn’t see it come back in some form with a Democrat’s name on it.”

According to a survey taken by the National Association of Home Builders of 1200 registered voters, two thirds of Americans support the $15,000 tax credit for all home buyers. What’s more, one-third of those polled and 61 percent of renters said they’d be more likely to buy a house if the credit were passed.

A coalition of housing industry companies called Fix Housing First is continuing to urge Congress to consider the credit, believing it would have created thousands of jobs and pumped much-needed money into the economy.

I’m inclined to agree. When the proposal was under consideration, my phone rang like crazy. Potential Minneapolis duplex buyers just aren’t as excited about the amended $8000 first time home buyer tax credit.

Perhaps that’s because there are a lot of people out there who would like to buy or sell; they simply don’t qualify for the credit because they’ve owned a home in the last three years.

Congressional arguments against the credit largely centered on the fact that it would have added $35.5 billion to the cost of the economic stimulus package.

What can we do? Keep writing and calling our Representatives and Senators.  Given enough pressure from constituents, anything’s possible.

Congress Forces Rush to Buy First Minneapolis Duplex

said on February 12th, 2009 categorized under: Buying A Duplex, Legislation


The Runninging businessman.According to the Los Angeles Times, yesterday’s compromise between the House and Senate versions of the stimulus package now features a $8000 first time home buyer tax credit.

While details have yet to emerge, and this has yet to be signed into law, this credit is significantly lower than the proposed $15,000 credit featured in the Senate’s version of the bill. What’s more, only first time home buyers are eligible for the break.

Unlike last year’s $7500 first time home buyer tax credit however, the $8000 does not have to be repaid. Properties purchased between January 1 and August 31, 2009 are eligible for the break.

As always, owner occupied single family homes, duplexes, triplexes and four-plexes are eligible for the credit.

Fair warning first time duplex buyers:  you have to close on the property by August 31.  It sometimes takes as long as 45 days to get a loan through final underwriting, a period which may be longer still if there is a rush of people trying to qualify for the tax break. 

It would be wise to think of your deadline to have a completed purchase agreement as being no later than July 15, preferably July 1.

You have 4.5 months. The longer you wait, the more competition you’re likely to face from other buyers.

I can think of four duplexes right now that could be a terrific buys. Get in touch with me. I’d be happy to show you where they are.

Minneapolis Duplex Buyers Need to Become Lobbyists

said on February 10th, 2009 categorized under: Legislation


Capitol Building detailI don’t usually write two blog posts in a day, today’s events in Washington DC compel me to do so.

The Senate just passed the stimulus bill. Now it’s up to negotiating committees from the House and Senate to settle the differences in their versions of the bill. And when it comes to housing, it’s important to note there are some very big differences.

The House stimulus package moves to make the current $7500 first time home buyer tax credit non repayable. In their version, this credit is refundable; even if you didn’t pay that much in taxes, you can get a check from the government.

The Senate’s version doubles that number, makes the tax credit non repayable and available to everybody who buys a home in the next 12months. Of course, with this version it’s a tax credit; meaning you can only get the $15,000 if you’ve paid that much in income taxes over two years. If you’ve paid less in taxes, that’s how much of a credit you’ll get.

It’s important our government representatives know where we stand. To locate contact information for your House representative, click here. Just enter your zip code, and you’ll be given a link with his or her contact information.

Of course, here in Minnesota, we still only have one senator. You can share your thoughts with Amy here.

Congress Done With Magic Lamp For Minneapolis Duplex Market

said on February 6th, 2009 categorized under: Legislation


Aladdin lampWe kept rubbing, but it looks like we’re not going to get three wishes after all.

The plan submitted to the Senate by Nevada Republican John Ensign that would have encouraged banks to lend at interest rates between 4 and 4.5 percent was defeated yesterday by a resounding margin. I think it would have helped, but most senate Democrats felt it would ultimately prove too expensive to taxpayers.

I called Senator Isakson’s congressional office yesterday in an effort to get a copy of the text of the amendment that provided for the 10 percent or $15,000 home buyer tax credit. They referred me to the web site, which has to be the most exasperating system for research in the world.

Apparently I wasn’t the only one who called, as the senator now has the amendment posted on his web site.

While yesterday’s information was that the credit could be taken retroactively on purchases made after December 31, 2008, the bill itself says something else. It states eligible properties must be purchased on or after the day the American Recovery and Reinvestment Tax Act of 2009 is enacted and expires exactly one year later.

The credit is non repayable, provided you own the house to two years.

The bill also reads that tax credit may be taken over two taxable years starting with the year the purchase is made, and the year after. Again, however, the amendment goes on to say that the taxpayer may  elect “to treat such purchase as made on December 31, 2008”.

If I’m understanding all of this correctly, think about this. Buy a Minneapolis duplex as soon as the bill is passed. File your 2008 taxes on April 15. Get up to $7500 back from the government in June. Of course, you have to have paid that much in tax in the first place. If you paid less, your tax credit will be reduced accordingly.

No matter. In this market,  that may well be more than the down payment!

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