First time home buyer tax credit - and increasing your business

I was explaining the first time home buyer tax credit just yesterday - and the client was stunned. "Why don't people know about this?"

Well, there's knowing it exists and there's knowing how to access it.

For people buying a home to owner occupy between now and November 30, 2009, there is a tax credit of $8,000 available if they meet the qualifications.

A tax credit is a reduction in TAX which can be paid as a refund if no tax is owed. Most people are familiar with an income credit, which reduces only the income on which tax is owed.

Simply put, if your client is like most people, they get a refund back each year. This tax credit gives them an additional eight thousand dollars in refund. This money can be used to pay down payment and closing costs in the State of Texas (while funding holds out) or just gives your customer a huge refund.

So, you can generate more closings or more referrals by letting your customers know about this program. Even if they don't personally qualify, the information may help their friends, which increases referrals and retention.

Here are the bullet points you can use to let people know about the program:

* First time home buyer means that they cannot have owned any property during the three years prior to the purchase
* If they borrowed money to purchase, it has to be an FHA loan
* They can either take the credit when they file their 2009 tax return next year, OR they can amend their 2008 return and take the credit now - getting the money in about six weeks
* They cannot have delinquent student loans, tax obligations, money owed to the Federal government, or child support obligations, or the credit would be used to pay down those obligations
* If they earned more than $90,000 in gross income in the year they take the credit, they are ineligible

Here is where the real meat is, that will give you the ability to generate a ton of good will and more referrals -

* If they bought their first home (under these rules) between April 1, 2008 and today, they can amend their 2008 return and get the money before summer's end.

Think for a moment what it would do for you if someone you had done good business with contacted you and said "Hey, I think you qualify to get eight grand back from the IRS - you should look into that". Would you be excited? Would you think first of that person when a friend was looking for that service?

You sure would.

If you want to know how to use the money for new transactions at closing, I'll gladly go through that for you with a more detailed briefing.

If you'd like a flyer that you can send out to your clients, just hit me back and tell me how many you want.

Of course, everything has to have a hook in it - I do these tax return amendments for $125 each. I would love to support you in expanding your good will by delivering swift, accurate and warm service to your clients - I'll even pay you a referral fee of ten bucks for each completed referral!

I know that it's tough to think about marketing yourself most of the time, given that there is so much else to be done - but this is a slam dunk way to generate terrific good will only for going through your closing list and contacting people who look like they qualify.

If you want to visit about this and get more information, please call me!

Douglas

IF YOU THINK THAT'S BIG, TRY THIS

If you're in the real estate or related industry, you probably have a smart phone. Blackberry, Treo, something that accesses the internet, has a full keyboard, does it all. Many Realtors now have smart phones that are their Supra key.

Have you ever marveled at one of these little hand held devices and remembered what it was like fifteen years ago? How much like Star Trek are these little things?

They're going to get a whole lot more complex, and a whole lot faster than you may think. In another four years, what we'll be buying will seem far more like a Star Trek tricorder than what we're using now. You have seen the billboards for "3G wireless networks" - welcome to 4G.

Now, if you go to that linked article about 4G and can read it and understand it, you're probably a physicist or something. I looked at it a few times and boiled it down to this:

* None of the phones we're using now will work at all in about three years
* What we're just now starting to get used to - streaming video on our handheld, slow and clunky internet, navigation on our handhelds - is merely a baby step compared to the 4G devices that we'll see awfully soon
* The only thing that will hold a 4G device back is the screen size. There will be some 4G handheld devices that will have more computing power than the laptop I'm writing this on - and you can use it to stream movies, work at your desk, or in replacement of the stereo system and navigation system in your car through wireless Bluetooth-like technology and full sized monitors/keyboards.
* South Korea has already re-wired their wireless networks to 4G and is rolling out the products - this is not speculation, it is coming more certainly than the inaguration on January 20
* In another five years or so, your new car will have a video screen, and a power/cable plug for your 4G device, which will be the video/audio/satellite radio/navigation system/trip computer/telephone for your vehicle. If you rent a car, you'll have your normal and familiar functionality with you.
* No more laptop cases, no more lugging your eight pound device around. No more desktop computers. Monitors, keyboards and pointers (commonly called a mouse) with a power port will be the work stations of the very near future. This alone will massively reduce electrical consumption.
* You'll never have to miss your favorite TV program ever again!

Well, Lieutenant Uhura, get me Star Fleet on the comm!

What to do with this information? If you're challenged by your Blackberry NOW, take a class about them at HCC or something! The train is whistling to leave the station, and your competitors (who can handle this massive technology shift) will be aboard!

JUST ONE MORE THING YOU SHOULD KNOW ABOUT THE REAL ESTATE BUBBLE

I think I've made this clear before - this wasn't because of the current administration. It takes a Village, and in this case, we'll now be thinking of them all as Village Idiots.

We've talked about predatory lenders, greedy Wall Street brokers, and loose lending regulations. How about the tax code? For a truly perfect bubble, you need favorable tax treatment OR loose regulations - and we had them both.

If you've always loved Ayn Rand's philosophy as expressed in "Atlas Shrugged," you should consider this a full refutement of that philosophy by its grandest champion:

"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."

Alan Greenspan, former Federal Reserve chairman

Big changes on the horizon

The Federal legislation that gives us SAFE (National Mortgage originator licensing) is going to go into effect on January 20, 2010. If you're one of those who won't be able to retain or be licensed after that date, now is the time to start planning your new career.

Virtually everyone who has a license now will have to re-test, re-qualify and be certified under the new standards, even though they are not as stringent as the Texas standards were already. Anyone who was grandfathered in at the beginning of Texas licensing will now have to pass the state exam for the first time.

These standards will apply to EVERYONE, whether employed by a Federally chartered bank, mortgage bank or mortgage broker. After January 20, 2010, anyone that's working with you originating a loan will be licensed to the uniform standard.

Can I have just one more hit off the credit bong, please?

Well, the Fed has thrown up their hands and said "Here, just take the damned money!" They've depressed interest rates again to a level that is almost as low as what we were seeing three and four years ago.

How low? Try an average of 5.19% 30 year fixed. That means that some lenders are offering 30 year fixed loans in the high 4% range.

Well, whoop it up, right?

Not exactly.

Here is a short list of people/scenarios which can no longer get loans:

* Stated income
* More than four mortgages including husband and wife together
* Non-warrantable condos
* Condos that are not FNMA/FHA compliant
* Neighborhoods with more than 10% foreclosed units
* Credit scores under 680 (FNMA) or 580 (FHA)

I'll tell you, this list is going to have people bellowing "oh, but I know I can do such and such."

And, they may be right. They could have very well done so. However, it's going to take the right borrower, the right property and the right lender to get those things done. If you're looking at a scenario where the proposed borrower is one of these things, get a back up contract at the very least. If you're a borrower with one of these situations, find a TERRIFIC mortgage broker and get fully approved FIRST.

It's nice to get one right -

A few years ago, I predicted that mortgage rates had fallen about as low as they could go - at the time, they were slightly below where we find them today - about 6.00% 30 year fixed.

I didn't realize at the time that the dedicated Ayn Rand supporter Alan Greenspan would push interest rates down further and keep them there for several years - creating an environment we now call the "real estate bubble."

So, I was right that interest rates in 1998 were about as low as they could go - naturally. It was an artificial push to move them lower. Still, I was wrong that "now is the time to buy or refinance, as rates won't go any lower."

Last I checked, 4% is lower than 6%. I blew that one.

However, a few weeks ago, I suggested that the end of consumer or non-owner occupied loans for high rise condos would put an end to the projects that had not yet come out of the ground.

I shared that opinion with a few Realtors and other friends, and they all nodded and rather gave me that "you're thinking too much again" look.

This morning, on the front page of the Houston Chronicle, we have validation de-lux.

When will all of the anti-Ashby high rise signs come down?

Whither the market goest

I watch with amusement the new lenders entering the market as the old reliables vanish. Every few weeks, another new mortgage banker steps forward and says that they can lend to those with sub-580 credit scores, or that they can do "liar" loans - stated income or no income documentation.

A few weeks later, that new mortgage banker sends out an announcement that they're no longer taking new files.

Any efforts to recreate the E-Z credit atmosphere of the past is doomed to fail. There just are no investors willing to take the risk. For the next several years, if not decade or more, loans will be made to those who can prove their income and credit quality.

Incoming regulations to ensure against identity theft, to use only third party automated documentation of income and bank deposits, and further restrictions on access to consumer credit will soon produce a totally new way of taking a loan application - you'll swipe your driver license.

The revisions to the Patriot Act plus other legislation mandate standardized state driver license record keeping and forms, and over the next few years, your driver license will be replaced with one that's just a little chunkier - it will contain an RFID chip - meaning that someone with an RFID reader could examine your name, address, driver license records, etc. It also means that your driver license will carry access to all kinds of secure databases. IRS records. Credit bureau records. Criminal background history. Voting records. Bank records. State unemployment/income records (which are updated weekly or quarterly and provide instant access to exactly how much you do earn).

Taking out a mortgage will instantly become instantaneous, as all of these databases populate into mortgage software, drive through the FNMA/Freddie Mac automated underwriting system and "presto!" You're nearly done.

This is going to make the private mortgage broker about as modern as the dodo bird. The analogy there is quite apt, only those that move quickly and strongly toward adopting these expensive technological changes will be able to compete with the new Super Banks - Chase, Wells, BofA. The private mortgage broker will only be able to work on self-employed persons and credit tiers that are beneath FNMA/FHA/VA standards - and then only with a handful of mortgage banks.

Choices will be extremely limited, and consumers shopping around will find it much harder to compare.

If you're in the mortgage business now, and you're committed to staying in the mortgage business, I suggest you start setting aside capital to secure access to this developing technology and data subscriptions, or start planning your early retirement.