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May 25, 2010

Proposed tax code changes target property owners, landlords

In Washington, D.C., the U.S. Congress is giving consideration to a series of revisions to the federal tax code, and among them are two provisions which would impact the housing industry and property owners.  The proposals, which would place additional tax burdens on owners and investors of residential and commercial real estate, are the focus of a member-wide Legislative Call-for-Action issued earlier this week which you are urged to participate in via the REALTOR® Action Center.

The most onerous proposal is one that would require all owners of rental property to provide an IRS Form 1099 to all contractors with whom they do business and pay $600 or more in a calendar year for services rendered.  This requirement would apply even to the smallest landlord who owns a single property and hires a plumber or electrician to perform repairs or renovation work, and require filing 1099 forms whenever applicable.  The National Association of REALTORS® argues that this proposed code change would impose new expenses on property owners, particularly small landlords who don’t use tax professionals, and would subject them to penalties they are ill-equipped to pay.

Additionally, Congress is considering taxing “carried interest” at ordinary income rates, instead of the current rate of 15 percent.  If this amendment to the tax code is changed, it would mark the first time a particular type of real estate investment gain would no longer qualify for capital gains treatment.  NAR opposes this proposal on the basis that real estate is a fixed asset typically held for a long period of time, and therefore fundamentally different from hedge funds and financial instrument investments.  The revision would set a terrible precedent and is ill-advised given the fact that the residential, multi-family and commercial markets are still fragile, NAR officials maintain.

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Boston area single-family home and condo sales climb for eighth consecutive month

The recovery underway in the local residential real estate market continued in April, according to the last monthly data compiled from MLS-PIN.  In greater Boston, sales of detached single-family homes and condominiums each rose for an eighth consecutive month in April compared to the same month last year, while median selling prices for homes and condos increased 14 percent and 8 percent respectively during the past 12 months.

A total of 799 detached single-family homes were sold last month, which represents a 45 percent increase over the April 2009 sales level, and is the sixth best sales total on record for the month of April in the 54 communities that comprise the GBAR jurisdictional area.  Condo sales increased an even more robust 50 percent over the past 12 months to 794 units sold in April 2010, making it the fifth strongest April sales total ever recorded in greater Boston.

In the detached single-family home market, the median selling price has now increased six of the past eight months dating back to September 2009, an indication that prices in most communities have stabilized and that trade-up buyers have been returning to the market in increasing numbers this spring.  Still, April’s median selling price of $440,200 for detached single-family homes remains 18.3 percent below the peak monthly median price of $539,000 recorded in August 2005, and this improved affordability along with continued near record low mortgage rates should keep demand strong through the summer months.  

Similarly, the median selling price for condos has risen for five consecutive months on an annual basis in greater Boston, following an extended period in which the median price fell during 16 of 17 months prior to December 2009.  The condo median price remains 9.9 percent below its peak of $372,000 set in July 2007. 

For more data and analysis on the housing market in greater Boston, visit the Monthly Housing Reports page and/or access the first quarter 2010 Real Estate Rewind report for data by specific community.

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Home Buyer Tax Credit Still Available to Some Military Personnel

 While the federal home buyer tax credit expired for most buyers who lacked a signed contract as of April 30, a provision in the legislation keeps the credit in effect an additional year for military personnel as well as intelligence and foreign service employees deployed overseas for 90 days or more between January 1, 2009 and April 30, 2010.  Individuals who meet the specific service criteria can still claim the tax credit if they sign a binding contract to purchase a home on or before April 30, 2011 and close on or before June 30 of next year.  The extended benefit could be helpful to members of the armed services ending tours of duty in Iraq and Afghanistan, and sailors returning from naval deployments around the world. 

Notably, members of the military also receive a waiver on the time of occupancy requirement of the home purchased with the tax credit.  While most home buyers purchasing a home with the tax credit must use that home as a principal residence for a period of no fewer than three years to avoid forfeiting the credit, military, intelligence and foreign service personnel do not have to repay the credit if they have to sell the home after fewer than three years occupancy due to official business. 

 Want to learn more? Additional information available online from the IRS.

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Fannie Mae Tightens Underwriting, Sets New Rules for Borrowers of Pre-foreclosure Events

Effective April 30, Fannie Mae has tightened its underwriting requirements for certain types of mortgages.  To help limit payment shock for those with an adjustable rate mortgage that adjusts during the first five years of the loan, borrowers must be qualified at the higher of the note rate plus 2 percent, or the fully indexed rate.  In addition, interest-only mortgages are being restricted so they remain as a financial management tool, but are not available to make a loan affordable.  As a result, interest-only mortgages may no longer be used for cash-out refinances, Flexible mortgages, MyCommunityMortgage® loans, investment properties, or two- to four-unit properties.  The minimum credit score for interest-only mortgages is now 720, and the borrower must have reserves covering at least two years. Finally, seven-year balloon mortgages are no longer available as a standard Fannie Mae product.

Notably, last month Fannie Mae also announced new rules regarding the eligibility of a borrower to obtain a new mortgage after a pre-foreclosure event – defined as a short sale or deed-in-lieu of foreclosure.  The new rules, issued on April 14, change the waiting period for these borrowers, and add variations depending on the loan-to-value ratio (LTV) and whether there are extenuating circumstances.  For a consumer with a prior short sale or deed-in-lieu of foreclosure without an extenuating circumstance, the new waiting periods are 2 years with an 80 percent maximum LTV, 4 years with a 90 percent LTV, and seven years otherwise.  If there are extenuating circumstances, the new waiting period is two years with a 90 percent maximum LTV ratio.  Fannie Mae has also tightened the requirements for re-establishing credit, so that in addition to the lengthier waiting periods, the loan must meet delegated underwriting and minimum credit score requirements, and the borrower must have traditional credit

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Nominations Sought for GBAR Member Recognition Awards

Do you know a deserving colleague or affiliate member whose professionalism and volunteer service to the REALTOR® association and the local community or charitable causes sets them apart from others?  If so, why not nominate him or her for one of this year’s GBAR member recognition awards?  This year, the association is seeking nominations for five different awards, including the inaugural REALTOR® Spirit Award and GBAR Affiliate Member of the Year.  The annual member recognition awards also include the Greater Boston REALTOR® of the Year, GBAR Good Neighbor, and Andrew F. Hickey Distinguished Service awards. 

Members may be nominated for one or more of the above awards.  The entry deadline for nominations is June 30, 2010.  For more information, including the purpose and criteria for each award, as well as nomination forms, go online to gbar.org for the GBAR Awards Nomination packet.

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REALTORS® to Rally at State House on June 8  

REALTORS® from across the Bay State will be gathering at the Massachusetts State House on Tuesday, June 8 for the 25th Annual REALTOR® Day on Beacon Hill.  This is an opportunity to speak directly with state legislators on issues affecting your business, the rights of property owners, and the housing industry in Massachusetts.  Plus, there is literally no cost to attend.

The program, which begins at 10 a.m., will include an issues update on the REALTOR® organization’s 2010 legislative priorities, as well as a keynote address by Massachusetts Senate President Therese Murray (D-Plymouth).  In addition, there will be a complimentary networking lunch at the GBAR/GBREB offices with local legislators to discuss bills of primary interest to the real estate industry, as well as an appearance by current Senate Minority Leader and REALTOR® Richard Tisei (R-Wakefield).     

Attendance at REALTOR® Day on Beacon Hill is free, and this year you can avoid the expense and hassle of driving and parking in Boston by taking advantage of free bus transportation being provided by GBAR for this event.  There are four suburban locations to park and board a bus – Dedham, Framingham, Sharon and Waltham – with seating available on a first-come, first-serve basis.  Registration and bus reservations are strongly encouraged by May 25, as seating is limited and invitations to legislators for the networking lunch will be based on members/constituents signed up to attend a minimum of two weeks prior to the program. 

For more information or to register for REALTOR® Day on the Hill, download our promotional flyer or go online to gbar.org.

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Are You Ready to Assume a Position in REALTOR® Leadership?

Applications are now being accepted from those interested in serving in elected leadership positions with GBAR in 2011.  If you or a colleague you know would like to take a more active role in setting the programming, policies, and strategic direction for the association, you are invited to submit a candidate application nominating yourself or a qualified fellow REALTOR®.  The deadline to apply for elected office (president-elect, vice president, treasurer), or open seat as a local, state or national director is August 1st, while application for the position of Greater Boston Region Vice President to the Massachusetts Association of REALTORS® (MAR) is May 31, 2010.  For position descriptions, including information on the qualifications and responsibilities of each open position, as well as the candidate application form the Officer & Director Nomination Packet is available for download from gbar.org.

Notably, members interested in becoming association leaders and more effective decision-makers and managers in business, also are encouraged to consider enrolling in the MAR Leadership Academy.  The Leadership Academy is a training program that allows participants to develop strong leadership and life skills, including goal-setting, networking and communication skills, through individual study, group sessions, and team-building exercises.  The program includes four sessions over a six-month period, and also requires participation on a MAR committee in 2011 and attendance at three MAR Board of Directors meetings from September 2010 – May 2011.  Tuition is $750.  The deadline to apply is June 30, 2010.  To learn more and obtain an application, Academy materials are available for download from the Association Leadership page at marealtor.com.

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GBAR Charity Receives MAR Housing & Homeless Assistance Grant

The Massachusetts Coalition for the Homeless, the designated charity of the Greater Boston Association of REALTORS®, has been awarded a $1,500 grant from the Massachusetts Association of REALTORS® (MAR) Charitable Foundation.  MAR’s Housing & Homeless Assistance Grants support non-profit organization’s that provide affordable housing, transitional shelter, and other emergency care services to residents of the Bay State.

This marks the third time in three years that the Massachusetts Coalition for the Homeless has been nominated by GBAR and subsequently chosen to receive a Housing & Homeless Assistance grant from the MAR Charitable Foundation, with a total of $6,000 awarded in that time.  Since 2008, an additional $30,000 in monetary grants has been contributed by GBAR to the Massachusetts Coalition for the Homeless through the GBREB Foundation.

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