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Builder Business Update:

Senate Adds $15,000 Home Buyer Tax Credit to Stimulus
Amendment to Senate version of stimulus bill provides the credit to all home buyers and doesn’t require repayment.
By Pat Curry

The U.S. Senate on Wednesday voted unanimously to approve a home buyer tax credit of $15,000 or up to 10 percent of the purchase price in its version of the stimulus bill. This proposed credit would be available to all home buyers and would not have to be repaid as long as a buyer lives in the house for at least two years. The amendment to the Senate’s economic stimulus package, co-sponsored by Sen. Johnny Isakson (R-Ga.) and Sen. Joe Lieberman (I-Conn.), offers the credit on purchases from one year of the date of enactment and could be applied to the home buyer’s 2008 taxes.

Isakson, who spent more than 30 years in the real estate business, proposed the tax credit because he’d seen it used effectively to jump-start housing in the 1970s.

“It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous,” Isakson said in a prepared statement Wednesday evening. “We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history, and repeated a method that worked by adopting this amendment.”

Dwight Jaffee, a professor of finance and real estate at the Haas School of Business at the University of California, Berkeley, called the 1973-1975 recession the “classic example” of how a direct stimulus to housing demand impacted economic recovery. “Housing led us into this recession, and we really need a stimulus for it to lead us out,” Jaffee said in a statement released by the Fix Housing First coalition, a group of home builders, manufacturers, and others advocating for several housing-related measures, including the tax credit.

According to Jerry Howard, the NAHB’s CEO, the amendment’s provision to offer the tax credit for a year from the date of enactment “reflects Sen. Isakson’s in-depth understanding of housing. It gives the people who market housing a chance to ramp this up and put it in its proper perspective in the field.” Depending on the enactment date, it could make the tax credit available well into 2010. (In previous versions, the tax credit was only availble through Dec. 31, 2009.)

Howard also said Thursday that the NAHB’s staff is working closely with the Senate offices of Sen. Mitch McConnell (R-Ky.), John Ensign (R-Nev.) and Lamar Alexander (R-Tenn.) on additional amendments that the Fix Housing First Coalition considers crucial to solving the housing crisis. Those include low-interest mortgages for home buyers and additional measures to stem foreclosures.

The National Lumber and Building Material Dealers Association also issued a statement this morning applauding the adoption of the amendment and thanking the senators for their leadership. “We believe, if adopted in the final stimulus package, the tax credit could go a long way toward reviving the housing economy by encouraging more home purchases, creating new jobs, and restoring consumer confidence in the housing market,” said NLBMDA President and CEO Michael O’Brien.

The Fix Housing First coalition, which includes the NAHB and NLBMDA, continues to advocate for additional housing stimulus measures, including an amendment that would provide discounted 30-year fixed-rate mortgage financing for eligible home buyers.

In appearances on television news shows, several senators this week expressed support for such an amendment. “We have a 4% mortgage proposal where creditworthy home buyers could buy down their mortgages or save them on the average $5,600 a year,” Sen. McConnell said on Sunday on “Face the Nation.”

One disappointment for home builders in the bill is that this amendment does not include the ability to monetize the credit at closing, a feature in an earlier bill Isakson filed in mid-January. “Emails were flying back and forth this morning, asking ‘Can it be used for closing?’” says Michelle Smallwood, vice president of sales for Melbourne, Fla.-based Holiday Builders.

Pat Curry is senior editor, sales and marketing, at BUILDER magazine.Senate Adds $15,000 Home Buyer Tax Credit to Stimulus
Amendment to Senate version of stimulus bill provides the credit to all home buyers and doesn’t require repayment.

By:
Pat Curry

The U.S. Senate on Wednesday voted unanimously to approve a home buyer tax credit of $15,000 or up to 10 percent of the purchase price in its version of the stimulus bill. This proposed credit would be available to all home buyers and would not have to be repaid as long as a buyer lives in the house for at least two years. The amendment to the Senate’s economic stimulus package, co-sponsored by Sen. Johnny Isakson (R-Ga.) and Sen. Joe Lieberman (I-Conn.), offers the credit on purchases from one year of the date of enactment and could be applied to the home buyer’s 2008 taxes.

Isakson, who spent more than 30 years in the real estate business, proposed the tax credit because he’d seen it used effectively to jump-start housing in the 1970s.

“It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous,” Isakson said in a prepared statement Wednesday evening. “We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history, and repeated a method that worked by adopting this amendment.”

Dwight Jaffee, a professor of finance and real estate at the Haas School of Business at the University of California, Berkeley, called the 1973-1975 recession the “classic example” of how a direct stimulus to housing demand impacted economic recovery. “Housing led us into this recession, and we really need a stimulus for it to lead us out,” Jaffee said in a statement released by the Fix Housing First coalition, a group of home builders, manufacturers, and others advocating for several housing-related measures, including the tax credit.

According to Jerry Howard, the NAHB’s CEO, the amendment’s provision to offer the tax credit for a year from the date of enactment “reflects Sen. Isakson’s in-depth understanding of housing. It gives the people who market housing a chance to ramp this up and put it in its proper perspective in the field.” Depending on the enactment date, it could make the tax credit available well into 2010. (In previous versions, the tax credit was only availble through Dec. 31, 2009.)

Howard also said Thursday that the NAHB’s staff is working closely with the Senate offices of Sen. Mitch McConnell (R-Ky.), John Ensign (R-Nev.) and Lamar Alexander (R-Tenn.) on additional amendments that the Fix Housing First Coalition considers crucial to solving the housing crisis. Those include low-interest mortgages for home buyers and additional measures to stem foreclosures.

The National Lumber and Building Material Dealers Association also issued a statement this morning applauding the adoption of the amendment and thanking the senators for their leadership. “We believe, if adopted in the final stimulus package, the tax credit could go a long way toward reviving the housing economy by encouraging more home purchases, creating new jobs, and restoring consumer confidence in the housing market,” said NLBMDA President and CEO Michael O’Brien.

The Fix Housing First coalition, which includes the NAHB and NLBMDA, continues to advocate for additional housing stimulus measures, including an amendment that would provide discounted 30-year fixed-rate mortgage financing for eligible home buyers.

In appearances on television news shows, several senators this week expressed support for such an amendment. “We have a 4% mortgage proposal where creditworthy home buyers could buy down their mortgages or save them on the average $5,600 a year,” Sen. McConnell said on Sunday on “Face the Nation.”

One disappointment for home builders in the bill is that this amendment does not include the ability to monetize the credit at closing, a feature in an earlier bill Isakson filed in mid-January. “Emails were flying back and forth this morning, asking ‘Can it be used for closing?’” says Michelle Smallwood, vice president of sales for Melbourne, Fla.-based Holiday Builders.

Pat Curry is senior editor, sales and marketing, at BUILDER magazine.

Question:
Do you think this is a good idea as a taxpayer?
If you are in the market to purchase a home, will this impact your decision to buy a home?

With so many details to think about, where do you start the
custom home process?  While it’s easy to get overwhelmed, we
like to simplify the custom home process by starting out
just looking at only two things.

What are these two things?
I can’t tell you because that would give away our
competitive advantage.

All right. You twisted my arm. Here they are:

Our process starts with two things:  1) you and 2) your lot.
That’s it. Pretty simple.

So I like to start things off playing Columbo.  When we meet
I’ll ask you questions that fall into just a four
categories. Here’s a small sample of our routine:

A.    $MONEY$ category

–    How important is resale to you?
–    Is return on investment your number one motivation
or is it a lower priority and you just want to
make sure you don’t do anything someone else would
think odd when you sell?
–    How are you going to finance your new home?
–    If you are going to use a lender, is a construction
loan, new first mortgage or new second mortgage best for
you? Can you use collateral of other assets to improve
your options?
–    How much cash do you have to put into your new home?

–    How much cash do you want to put in to the new home?

–    Have you spoken with a lender (we prefer you use ours I’ll

explain some advantages in future post)?
–    What tax bracket are you in? There could be some tax benefits

related to the project that may apply to your situation.

B.    Lifestyle category:

–    How long do you think you want to live in your new
home? This usually factors in to energy efficiency
and “green” options and calculating the pay-back period.
–    Are you there for 5 years and then on to the vineyards
of Oregon or is this your last home and you want us
to design a master suite on the first floor or an
elevator to get to the 2nd floor?
–    When do you want to see the home started by? This
can be a big factor when jurisdictions like Arlington,
D.C. and Montgomery County are constantly changing
zoning and building codes. Montgomery County just
passed a law that takes effect in four months
decreasing height and density in many neighborhoods
& sprinklers will be required in all dwellings in
two years (I’ll verify the exact date).
–    When do you want to move in to the home?  – “by Christmas”
is always a lofty goal and as long as you don’t
mind me asking “which one?” (I couldn’t resist)
we’ll always hit it.
–    Where will you live during the construction
(we have sources for short term rentals, but ask
me early since they go fast)?
–    Do you plan on in-laws or relatives coming back
for any period of time? What bathroom will they
use? What kitchen will they use? We just finished
a home in Silver Spring with three kitchens – one
for the kids with 5 kids of their own, one for the
parents and one for Aunt Lee, who visits during
the summers.

C.    Your Future Home (and little bit about your
current home) category

–    What are the features and amenities that you must
have, or the project just isn’t worth doing?
–    What are the features and amenities that would
be nice to have?
–    What style home do you love?
–    What style home do you hate?
–    What bothers you about your current home?
–    What do you love about your current home?
– How important are energy efficient features?
–    How important are green features?
–    Do you like open plans with a ton of natural
light and views from front to back or would you
prefer something more intimate and cozy?
–    What ceiling heights do you want? How do you feel
about two story spaces?
–    Do you want a basement? If so do you want it
finished?

D.    And Last but not least – Your Lot category – this
is always a biggie, so big I’m adding these extra
few sentences before I get to the.

It always surprises and shocks me, like a slurp
of Red Bull, when people don’t call us prior to
buying a lot (I bet you can tell, it especially
upsets me).

There could be so many restrictions on lots, for
instance: easements, setbacks, alleys, lot coverage,
height, etc., etc., etc., etc., etc., which you
would never know just by looking at a piece of dirt
with your eyes.

We just completed two subdivisions, on two separate
projects, that probably added six (unexpected)
months to each project. And added thousands of
dollars in engineering and permitting fees.
In each case the owners were not aware of the
restrictions until we performed our zoning analysis.
And in each case they had owned the lots for many years.

So checking the “buildability” of your lot is one
of the very first steps we take.
IF YOU’RE PURCHASING A LOT, please call me before
you pull that trigger!

Here are some things we look at (this is so
critical I’m tossing out the regular bullets):

• Zoning category
• Public utility easements
• Building restriction lines
• Established front yard building line
• Setbacks on all sides of the property
• Floor area ratio
• Year the lot was recorded
• Is the lot a conforming or non-conforming
• Specimen tree issues
• Tree Save issues
• Water Run-off
• Wetlands

Due to the complexity of some of these issues,
complete research and answers may be a few steps
into our process. And to paraphrase a soon to be
ex-senator, this stuff is way beyond my pay grade,
so, Kevin, our excellent and unflappable architect,
handles most of this.

Well that’s a brief primer on how we start the custom
home process.  It all starts with you and your lot,
as it should be.

Next time I’ll give you an idea of what we do once
we get your answers. But it’s 12:08 a.m. and I need
to take out the garbage so I can earn my keep.

Please keep the comments and critiques coming
and let me know what’s on your mind. And I’d appreciate
if you could tell me:

• What would you love to see during the home building process that would make your life easier?

• What frustrates you the most about the home design and building process?

Renovation financing gives you:

* More money to work with. The amount you can borrow is based on the expected increased value of your home, after improvements are made.
* Less Strain on Your Budget. You can pay for your renovation gradually and affordably, over the loan term of your mortgage.
* Less to Pay at Tax Time. Unlike other credit options, the interest you pay on funds used for a renovation may be tax deductible.
* Less Hassle. You’ll have one loan to apply for, one set of fees, one closing to attend, and one monthly payment to make.

Is Renovation Financing for You?
It is, if you have any plans for minor or major renovations to your home in the next six to 24 months. If you’re buying a house today and considering some home improvements next year, you may find it’s cheaper and easier to have the renovations done now with your financing for the purchase and the renovation all handled in one transaction.
All Kinds of Needs Covered
You should be able to finance any kind of improvement or repair to eligible properties.

Thinking of Building or Buying A New Custom Home but not sure what to do in this volatile market? Are you on the sidelines waiting to buy a new home? Why not use this time to get ready.  Here are things that you should be doing now to position yourself:

Financial preparation is the first–and perhaps the most important–step in the homebuying process. Get ready for your purchase by taking a careful look at your savings, credit, income, and debt.
Down-payment options
Buying a home doesn’t necessarily mean having to make a large down payment. We provide a variety of loan programs that can help you buy a home using little or no cash.

If you have a down payment goal in mind that you need to save for, you’ll reach it more quickly if you stick to these simple rules:

* Pay yourself first. When you pay your monthly bills, the first check you write should be to your savings or investment account.
* Avoid unnecessary purchases. The less you spend on things that you don’t really need, the sooner you’ll become a homeowner.
* Set realistic goals. Take an objective look at your monthly income and expenses, and decide how much you can really put aside. It defeats the purpose of saving for a home if you fall behind on your other obligations.

Your credit
Responsible credit use is an important part of the mortgage equation, and your lender will take your credit history into account when deciding whether to approve you for a mortgage. If you have a strong credit record, do your best to maintain it until you buy your home. If you’ve had credit problems in the past, the time to reverse that trend is now. Follow these steps to put yourself in the best possible credit standing:

* Check your credit report. Report incorrect or outdated entries on your credit report. Each year, you can get one free credit report from each of the three credit agencies through www.annualcreditreport.com.
* Contact creditors if you have a problem. Many creditors are willing to work with clients to help relieve difficult financial situations. It’s always better to seek help than to let a problem go unchecked.

Income and debt
To determine how much you may be eligible to borrow, we’ll generally compare your income to your outstanding debt. Guidelines vary, depending on your loan program, your credit history, and other compensating factors. It’s best to avoid taking on new debt in the months leading up to your purchase.

But even if your debt expenses are high, you may still be able to get a mortgage. Our financing programs help make homeownership affordable for people from a variety of financial backgrou

There are many scam artists eager to prey on unsuspecting borrowers. Don’t be one of them.

You can avoid the devastating effects of fraudulent lending practices by following the basic guidelines offered by the Federal Trade Commission:

DO NOT

• Enter into a home equity loan if you have insufficient income to support it.
• Sign any papers you haven’t read or any documents that have vacant spaces that are to be filled in after you sign them.
• Allow anyone to pressure you into endorsing any document you don’t understand.
• Agree to a loan that contains unwarranted credit insurance or other charges you don’t want.
• Allow the promise of extra cash or lower payments cloud your good judgment about whether or not a loan is really worthwhile.
• Deed your property to anyone. Consult an attorney or someone else you trust before considering this risky action.

DO

• Request specific information if credit insurance is a mandatory condition of your loan. If credit insurance is not required and you don’t want it, and if there has been a fee added to the loan, ask that the charge be removed from the loan text. If you do want some sort credit insurance, take the time to shop around for the best rates and terms.
• Maintain careful records of what you’ve paid, incorporating billing statements and canceled checks. Question any charge you suspect is inaccurate.
• Check contractor’s references before you start work on your home.
• Read and review all items carefully. In the case that you need any terms or conditions explained, talk to someone you can trust first. Weigh and consider all the costs of financing before you agree to a loan.