The Minneapolis Real Estate Blog: February 2009

The Minnesota Association of Realtors put out a couple of videos this week regarding some short sale practices and the legal implications that could go along with them. It is really informative on what to be careful of, should you decide to be the buyer of a clients home, and then assign the contract to a third party. The process is common in short sales, but the problem arises when the Realtor is also the listing agent, and could be putting his interests ahead of his clients. Like always, transparancy is the keyword in these types of transaction.

I dove into the Stimulus Plan on the House Appropriations website to try and find out what kind of agreement the Senate and House of Representatives came to regarding the First Time Home Buyers Tax Credit. Not the most fun reading, but extremely important to know about for any serious real estate professional.

Currently, a taxpayer who is a first time home buyer (someone who has not owned a home within the previous three years) was allowed a refundable tax credit of the lessor values of $7500 or 10% of the purchase price of the home. The credit was allowed for homes purchased between April 9, 2008 to July 1, 2009. However it would have to be repaid, interest free, over a period of 15 years, or recaptured at the time of sale.

The stimulus package modifies the current rules, but also keeps the following in place:

• the tax credit phases out for individual tax payers you have a modified gross income of $75,000 to $95,000 ($150,000-$170,000 for joint filers)


• tax payers can claim the purchase of a home on their 2008 tax return (thus the reason for the credit beginning on December 31, 2008), even if they buy their home, for example in January of 2009

The new agreed to provisions that go into effect December 31, 2008 and are:

• extends the current home buyer tax credit for qualifying home purchases to December 1, 2009


• increases the maximum credit to $8000 ($4000 for a married person, filing separately)


• waives the recapture of this tax credit for homes bought between December 31, 2008 to December 1, 2009


• if the home is sold, or ceases to be the primary residence, within 36 months of the closed date, then the rules of recapturing the tax credit apply (currently over a time period of 15 years)

The part that really stinks about the revisions is for the first time home buyers who closed on their home between April 9, 2008 -December 30, 2008. It appears they will still need to repay the tax credit of $7500 over a period of 15 years, just as originally written, and none of the new revisions will apply to them.

Don't worry though, at least you get a tax credit. We closed on your new home in March 2008, and even though we are only 30 days out for qualifying, no soup for us!

Ok, I just cannot take it anymore.

I have sat on the sidelines, fuming, but keeping my mouth shut here on the web.But after last nights "show" from Mr. Obama, I have had enough. (by the way, I have given this guy two weeks to show me some true leadership, and since I lost all respect for him last night, I no longer will call him Mr. President...he doesn't deserve the title).

Wake up America!

Can you not see what is happening to our country?

When someone tells you that government is the only solution to your problems and when fear is invoked to get you to go along with policy, don't be surprised when you wake up in a few years and find yourself living in a socialist society.

Remember Stalin? He ruled by FEAR. Hitler ruled by FEAR. Mao ruled by FEAR. Now I am not saying that Obama is any of these guys, but you have to wonder what in the hell is going on, when in two weeks, we have seen more social policy crammed down our throats than I have seen in my lifetime. And every time I hear Obama speak, he tells us that all hope is lost if we don't follow him. If you hadn't noticed, he is ruling by fear, folks.

Are we so willing to roll over and bury our heads into the sand, let someone else deal with our problems? Have we become a nation of so much laziness that we won't take the time to voice our objection to bills that make no sense? Are we so willing to put this burden on our children and grandchildren...paying for the sins of the father? I look at my two toddlers and seriously want to cry at what they are going to have to face in 20 years.

Washington is committing the ultimate sin right now, going against everything this country was founded on. The founding fathers are probably rolling over in their graves.

Now I have to hear that the Dems are trying to sneak in a health care provision that will drastically change the way health care is treated in the United States! Talk about sneaky politics. Or how about moving the Census under the wing of the White House so that the Dems can redistrict states for more favorable outcomes in their elections. Does any of this scare you at all?

The fact is this, it is all happening before our very eyes, and if we allow our country to move to a more socialist state, the only person to blame is the one that looks you back in the mirror everyday.

Stop listening to the fear, and decide for YOURSELF what is the truth, not what someone tells you is the truth.

I just read an interesting article which predicts the next 15 companies that could likely fail in 2009. While some of them are no big surprise, like Chrysler, who should have failed decades ago, or Blockbuster, who has been struggling ever since online video rentals have taken off (I am an avid Netflix fan), some are rather surprising.

Well, OK. Krispy Kreme is really not that surprising. They over expanded in the United States and stretched themselves too thin. Sometimes, staying small is the best plan for long term survival. But one that I was surprised to see is Realogy, the largest real estate brokerage in the country:

"Realogy Corp. (Privately owned; about 13,000 employees). It's the biggest real-estate brokerage firm in the country, but that's a bad thing when there are double-digit declines in both sales and prices, as there were in 2009. Realogy, which includes the Coldwell Banker, ERA, and Sotheby's franchises, also carries a high debt load, dating to its purchase by the Apollo Group in 2007 - the very moment when the housing market was starting to invert from a soaring ride into a sickening nosedive. Realogy has been trying to refinance much of its debt, prompting lawsuits. One deal was denied by a judge in December, reducing the firm's already tight wiggle room."

It will be no surprise to me if some real estate brokerages go out of business in 2009 and 2010. Many just over expanded and overspent during the fat years, and left nothing for the lean years. I believe that the local Realtor association has said about 15% of the agents in town have left the business. While driving around town, I have seen many real estate offices up for sale, as they rush to downsize and save themselves.

The funny thing about this, to me at least, is it seems many people and businesses should have reread the Biblical story of Joseph. See Joseph could interpret dreams and when Pharaoh had one he couldn't decipher, Joseph came to the rescue and predicted that Egypt would see 7 years of famine after 7 years of feast. Their solution? Put some food aside during the seven years of plenty, so they would not suffer from hunger during the famine. Hmmm...there's a novel idea.

But so many businesses, including our local governments, saw the money flooding in and decided to build larger buildings, expand, grow, grow, grow, and were so blinded by the wealth they violated history, and are now paying for it. Cities in Minnesota are right now debating on whether to cut school funding and after school programs...because they are facing a budget deficit. You've got to be kidding me. I don't see them proposing to cut a few of those high paying government jobs instead.

Please, can someone answer how governments survived 5+ years ago, before the boom, on a budget, but cannot do it today?

The other day we got a misty snow early in the morning which coated the trees with glimmering snow. As the sun was rising, I decided to turn down a rural lane on the way from dropping my son off at pre-school and take some shots.