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President Signs New Homebuyer Tax Credit

homebuyer tax creditPresident Obama signed the bill that included the new Homebuyer Tax Credit yesterday, extending and expanding the First Time Home Buyer Credit that was set to expire on November 30, 2009.  The new credit is no longer limited to first time homebuyers and now includes buyers who are selling or have recently sold their home. 

The details of the credit are fairly complicated  and you’ll need to factor in the dates of your purchase relative to the enactment of the legislation. Consult your accountant or tax practitioner to determine your eligibility for the credit.

Here are some highlights of the new bill:

Who Is Eligible For A Homebuyer Tax Credit?

  • A buyer qualifies as a first time home buyer if he or she has not owned a home in the three years prior to the purchase
  • Homeowners buying a home who have used their previous home as a primary residence consecutively for five of the previous eight years

How Much Is The New Credit?

  • First-time buyers – $8000 or $4000 married filing separately
  • Current homeowner – $6500 or $3250 married filing separately

When Does The New Homebuyer Credit Expire?

  • Buyer must have a written binding contract to purchase in place by April 30, 2010
  • The homebuyer has until July 1, 2010 to close

Is There A Home Purchase Price Limit For The Credit?

  • Yes. The home purchase price is now capped at $800,000. 

What Are the Income Limits For The Home Buyer Credit?

The income limits have been increased with the new credit.  Previous income limits are in parentheses.

  • $125,000 single ($75,000)
  • $225,000 married ($150,000)
  • Additional $20,000 phase out

 Low interest rates, a tax credit, and lower prices – it’s good to be a buyer right now.  Looks like the spring real estate market will start early this year!

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Why Don’t They List The Taxes For The Condo?

house money 3dSometimes when you’re looking through the real estate listings of condos for sale you’ll come across condos where no amount for the property taxes is given.  Or maybe there’s a bunch of nines – “99999” is often used to fill in a required field when there’s no info to enter.  So why don’t they list the taxes for the condo?

Typically a lack of property tax information means that this is a new condo – either a newly built condominium or an existing building – often a multi-family – that’s in the process of being split up and converted to condos.

In the case of an existing building sometimes the listing will show a number that seems too high – much more than you expect to see for annual taxes for a condo in this price range. That may be because the agent has put the tax bill for the entire building in the field.  However, as a condo owner you’re only going to be responsible for taxes on your unit – not on the whole building.

When an existing multi-unit building is converted to condos there is typically some lag time before the town or city Assessor assesses the individual condos.  Until then your tax bill will be your portion of the bill on the entire building.  Your condo’s percentage of ownership is defined in the condo documents. 

percentageLet’s say you bought a condo in a triple-decker that’s just been converted to condos. If the units are all the same size your ownership percentage is probably 33.3% – so you would be responsible for one-third of the building’s tax bill until the city recalculates the taxes by unit.

You’ll want to talk to your new neighbors in your building to find out how the tax payment should be handled.  Perhaps one person will collect everyone’s checks.  Often your lender is collecting money from you each month in an escrow account that will cover your taxes.  You want to make sure that your bank only pays your portion – not the whole building’s.

The City of Somerville website has a really good page about taxes for new condos. While much of the information is specific to Somerville, there’s also a good description of what happens tax-wise when new condos are created.

Wondering what your taxes are likely to run? To get a rough idea you can look at the taxes on condos that are assessed for amounts close to the purchase price of your condo.  Or check the city or town’s property tax rates and multiply by the sales price of your condo to get an estimate.

Have more questions about your real estate search? Email me or call me at 617-504-1737 – I’m happy to help!

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How To Make An Offer On A House Or Condo

Making an offer to buy a home

Making an offer to buy a home

How To Make An Offer On A House Or Condo   You’ve found the property you really like, the one that seems just about perfect, the one that feels like home when you open the door.  What happens next? 

How do I make an offer to buy real estate in Massachusetts?

We’ll want to meet in person, if at all possible, when you’re ready to make an offer.  It is possible to put in an offer when you’re out of state or out of the country – using email or fax and phone we’ll be able to fill out the forms.  However, if you’re local it’s definitely best to meet in person for about an hour or so – longer if we get to talking at length- or stressing! – about the many details.

You’ll need to bring two things to our meeting – a copy of your lender’s pre-approval and a check.  The seller expects to see evidence that you qualify for a mortgage sufficient to purchase the property so a current pre-approval letter needs to be submitted. The offer is accompanied by an initial deposit, also called an earnest money check.  In the Cambridge area a $1000 deposit is customary.  In a multiple bid situation you may decide to increase that initial deposit.  Your check cannot be cashed unless and until your offer is accepted.  That $1000 will go towards your down payment on the property.

In Massachusetts, the home buying process has two steps – the initial offer and the Purchase and Sale contract or P & S, typically signed about 10 to 14 days after the initial offer.  The P & S is drafted by your attorney and the seller’s attorney.  When you sign the P & S you’ll be putting down an additional deposit, typically enough to equal a total deposit of 5% that goes towards your down payment.  Sometimes that deposit amount will vary and we can talk about your situation and strategy when we meet. 

In Massachusetts the Offer to Purchase real estate is typically a one-page form.  Not that you’re going to get off that easy – there are a number of other required forms but the main details can be spelled out on one page.  On that main page we’ll specify the amount you’re offering to pay for the home, the amounts of your deposits, the contingencies of the sale, and the dates for the transaction.  When we meet we’ll talk about what’s customary, what if anything we know about the seller’s desires, and what works for your schedule and write the offer accordingly.

We’ll decide on a deadline for your offer.  In Cambridge it’s customary to ask for a response within 24 hours, or sometimes even more quickly.  Again, it’s a strategy and something we’ll talk about when we meet.  It’s not uncommon to learn after we submit the offer that the seller needs more time to respond and you can opt to extend the deadline.  Customarily the sellers will respond in a timely fashion – so you won’t be on the edge of your seat for too long!

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Have more questions?  Feel free to email me or call me at 617-504-1737.  And if I can help with your real estate search I’d be delighted.  My coverage areas include Cambridge, Somerville, Arlington, Belmont, Medford, Watertown and nearby communities.  If you’re moving out of the area I can refer you to a great agent who can help you find your next home.

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Buying A House Or Condo In Cambridge – What To Bring To The Closing

Buying a House or Condo in Cambridge – What to Bring to the Closing  The big day is almost here – you’re buying real estate in Cambridge – your first house, a new condo  – congratulations! 

What Do I Need To Bring To The Closing?

Cambridge Real Estate Closing

Cambridge Real Estate Closing

A limber wrist is probably the most important thing to bring to your real estate closing – there’s a reason the closing is often referred to as “passing papers”.  Nowadays at a Massachusetts real estate closing there’s a large stack of papers getting passed around the table between buyers, sellers, and attorneys.

Seriously though, here are the things you need to remember to bring with you:

A bank check  – also called  a certified check or cashier’s check.  The check for the amount of money you’re bringing to the closing can’t be a personal check – the bank requires cleared funds.  The bank attorney’s office will let you know the amount of the check a day or two before the closing.  If the figure for the check still hasn’t been determined sometimes they’ll give you an estimate and either you or the attorney will write a check for the difference at the closing.  Typically, you’ll be instructed to have the check made out to yourself and then you’ll sign the check over at the table.

Don’t forget to arrange for access to your funds for the closing. If you need to move money around it’s best to do it well in advance of the day of your sale.  You may choose to have your bank wire the money but this too needs to be arranged in advance.  The bank attorney’s office will be able to give you wiring instructions.

Photo ID.  You are required to present photo identification at the closing – a driver’s license or a passport is what people usually bring. It’s a good idea to have a second form of identification as well since every so often a bank asks for a second form of ID.

Your checkbook.  It’s not uncommon for a personal check to be needed for some miscellaneous expense or recalculation.  Nowadays more and more people don’t carry a checkbook but you should be sure to pop one in your bag just in case.

An hour or two at the table and you’ll be the happy owners of a new house or condo.  Congratulations!

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Buying A House Or Condo In Cambridge – What To Bring To The Closing by Elizabeth Bolton, a Cambridge real estate agent at Coldwell Banker, 171 Huron Avenue, Cambridge MA.

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Moving To or From Cambridge? Get a Permit for That Moving Truck

Moving to Cambridge - Get a Moving Van Permit

Moving to Cambridge - Get a Moving Van Permit

Parking your car can be enough of a challenge in Cambridge.  Finding the equivalent of three adjacent parking spaces for your moving truck can be close to impossible. 

With just a bit of planning you can reserve a space – a really big space! – with a Moving Van Permit from Cambridge’s  Traffic, Parking & Transportation Department. 

Moving Van Permits:

  • Application must be submitted six business days in advance
  • Cost is $25 for a truck up to 49 feet or $50 for 50 ft+ per day
  • If the reserved space includes metered spaces there’s an additional $10 per parking meter fee

The Traffic and Parking Department will post signs reserving your space for the allotted time.  A bit of advice – be generous with your time expectations – a move always seems to take much longer than you anticipate.

Click here for info about the Cambridge moving van permit and an application.  Be sure to disable popups before clicking on the link for the application.

I can say from personal experience that this was the best money I spent for my move to Cambridge.

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Assessment – Appraisal – Asking Price – How to Value Cambridge Real Estate

It’s often easy to get confused about how Cambridge real estate is valued – assessment, appraisal, and asking price – what’s the difference and what do these terms and numbers mean?   Assessment vs appraisal – asking price or market value – what’s it all about?

The Assessment

Valuing a Cambridge Home

Valuing a Cambridge Home

The assessment is the value placed on the home by the City’s assessors.  Your property tax bill is based on your assessment.  This leads to an odd dynamic – as a Cambridge homeowner you want your assessment to be as low as possible in order to pay less in taxes.  But as a homeseller or a buyer of Cambridge real estate you usually feel better if the assessment is higher.  For buyers, that’s often because they’re confusing the assessment with the appraised value or market value – which are often very different.

The City of Cambridge uses a very convoluted method to determine appraisals which I won’t attempt to describe here.  I once watched a televised City Council meeting during which the City Assessor tried to explain to the City Councilors how Cambridge assessments are calculated.  It was a looooong presentation that made me feel a lot better about not being able to summarize the methodology in a sentence or two. 

The assessment often varies widely from the market value of a Cambridge property and usually that should not be a matter of concern.  For some time a Cambridge house that was priced closed to its assessment was the rare exception.  Then the City reassessed properties and in many cases the new assessments were far higher than the property’s value on the real estate market.  There doesn’t appear to be a discernible relationship between current assessments and current real estate values. 

While assessments can sometimes be of interest when comparing a number of  properties in on area, in general the assessment shouldn’t be the number you focus on when you’re looking at Cambridge real estate. 

The Asking Price

The asking price or market price for Cambridge real estate should be based on recent sales activity for comparable properties.  When a real estate agent works with a seller to put a property on the market for sale, the agent prepares a comparative market analysis to determine the market value of the home.  Sometimes there haven’t been comparable homes listed for sale recently.  The realtor will use his or her knowledge of the marketplace to determine a suggested value for the property.  Ultimately, the seller, with advice from the agent, decides on an asking price.  The response from buyers will determine whether that is the “right price” or if the home’s value in the marketplace is lower or higher.

The Appraisal

The Bank Orders an Appraisal for Your Cambridge Home Purchase

The Bank Orders an Appraisal for Your Cambridge Home Purchase

There’s one more number or value that needs to be determined before the sale is closed.  After a buyer has an accepted offer on a property and has applied for a mortgage, the lender will have an appraisal done on the home.  The appraiser will compare the property to similar properties that have sold recently – usually within the last six months.  The appraisal will be submitted to the lender and as the buyer you’ll usually be able to get a copy of the appraisal by your closing date. 

In short:

 Assessment = City’s value for property tax purposes

Appraisal = Value for bank for lending purposes

Asking price = Seller’s price that buyers will decide is either too high, too low, or just right

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Elizabeth Bolton is a Cambridge real estate agent at Coldwell Banker on Huron Avenue.  Contact Liz if you have more questions about buying or selling real estate in Cambridge Massachusetts or nearby.

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My Offer Was Accepted – What Happens Next?

Congratulations!  Your offer on a home was accepted and you’re probably wondering what happens next. 

Things to Do When Your Offer on a Home is Accepted

Things to Do When Your Offer on a Home is Accepted

Perhaps you’ve been searching for real estate for weeks, maybe months. Finally you’ve found the perfect house or condo, decided to make the leap, written an offer, perhaps gone through a round or two of negotiations, and finally come to terms – the seller said yes.  The offer to purchase was signed, you’re on your way.  Now you’ve got several things to take care of right off.

In Massachusetts, the home buying process has two main stepsthe initial offer and the purchase and sale contract.  The purchase and sale contract is typically scheduled to be signed about ten to fourteen days after the date of your offer. During that period you’ll need to:

  • Schedule an inspection and get back to the seller with concerns if any.  The deadline for your inspection response will be in your offer.  It’s typically about one week after the date of your offer on the home.
  • Engage a real estate attorney to represent you during your purchase. Massachusetts is a state where almost all buyers and sellers work with an attorney during the home buying or selling process. Your attorney and the seller’s attorney will work to draft the purchase and sales contract which is a more fully fleshed out agreement between you and the seller. 
  • Apply for mortgage financing.  Your offer will spell out the deadline for filing a mortgage application, usually no later than the purchase and sale date.  Nowadays the banks are not processing applications as quickly as they have in the past so it is a very good idea to get this process started sooner rather than later.
  • When you sign the purchase and sale agreement you’ll need to provide an additional deposit – typically enough to equal 5% of the purchase price of the home you’re buying.

There’s a lot to do in the first couple of weeks after you’ve found your dream home.  Once these hectic days are past you’ll have less to do – or more time to pack I guess!

SEARCH FOR CAMBRIDGE REAL ESTATE

 

Elizabeth Bolton is a real estate agent in Cambridge Massachusetts and author of My Offer Was Accepted – What Happens Next?

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Unanticipated Expenses When Buying a House or Condo in Massachusetts

What sort of unanticipated expenses might you encounter when buying a house or condo in Massachusetts?

You’ve been saving for years, you’ve carefully budgeted the money you need to  buy a condo or your first house, you think you have a handle on the costs – and then an unanticipated expense hits you at the last minute. Ouch!  What are some of the miscellaneous costs of buying a house or condominium in Massachusetts?

Insurance for Home Buyers

insuranceInsurance– When you buy a house the bank will require proof – an insurance binder – that you’ve paid for a year’s homeowner’s insurance coverage.  Most likely the bank will set up your monthly mortgage payment to include money towards future insurance payments.  This money is held in escrow by the bank which typically collects money towards your property taxes as well. Even though you’ve just paid for a year’s coverage the bank will also collect several months worth of that monthly escrow amount.

Condominium associations are covered by master insurance.  As a condo unit owner you will be responsible for a portion of that coverage which is typically budgeted and paid for with your condo dues .  If you’re buying a new condo it is not uncommon for you to be required to reimburse the developer for insurance payments he has made in advance. For example, if the developer paid for a full year’s coverage you would be required to pay your unit’s portion of that bill. 

Master insurance for condos typically covers the building “from the studs out” and condo owners are encouraged to get an additional policy to cover the contents and finishes of their unit.  Until recently that coverage was not required as a condition of your mortgage but due to changes in lending guidelines, it is now a requirement to get a mortgage.  The coverage is called HO-6 insurance and lenders and others involved in the home buying process are just getting a handle on what’s required.  Lenders are requiring coverage equal to 20% of the appraised value of your condo and you would then get additional coverage for your possessions, etc.  Your attorney, lender and insurance company can provide guidance.

Title Insurance

Title Insurance is an unexpected expense that buyers often don’t find out about until quite late in the process since it is usually paid for at the closing.  As a buyer you assume all costs incurred by the bank making your loan.   You will pay for title insurance to protect the bank – that’s not optional.  Title insurance coverage to protect you is optional however. 

When I bought my first house I wasn’t spending any money that I absolutely didn’t have to and chose not to get title insurance.  In the years that followed, however, I repeatedly read real estate attorneys’  newspaper columns that advised homeowners “if you had title insurance you would be ok” in response to some question about a problem (or disaster!) they were having with their house.  I’ve made sure to purchase title insurance ever since.  Like much insurance it’s coverage you may never have to use but sure will want to have if some problem comes up – documents that were misfiled, problems with what’s deeded to you and what isn’t – the problems that title insurance covers are varied and unexpected and often come up years down the road when you’re trying to sell your home to move to a new place.  Title insurance will help to address those unexpected problems.

Contribution to Reserves

bringing-moneyIf you’re buying a new condominium in Massachusetts most condominium associations will require you to  contribute two months of condo fees to the condo association’s reserve account.  This means that the new condo association will have a balance in the bank to deal with any issues that come up.

Heating Oil

If the house or condo that you’re buying is heated by oil you’ll be required to reimburse the owner for the oil in the tank.  Shortly before the closing, the seller will get a statement from the oil company that gives the value of the oil in the tank.

Better to know what to expect so the unanticipated expenses when buying a house or condo in Massachusetts don’t trip you up at the last minute.

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