So I get a phone call from an angry reader who complains that the Housing and Economic Recovery Act’s $7,500 tax credit to first-time buyers is a sham.
“It’s just a zero-interest loan!” the fellow shouts loudly into the receiver, as if I’m responsible for the actions of Congress. “The least they could have done was given us a gift!”
Yes, the tax credit technically is a zero-interest loan that you will repay to the government over 15 years, starting two years after the credit is claimed, at $500 a year.
If you sell the house, you repay the entire amount if there was enough profit to do so. If not, the amount that you don’t repay is forgiven.
Why isn’t it a gift? You already got a gift this year with the economic-stimulus payment. You think the federal government has a lot of money to spare? Look at the record deficit and tell me Uncle Sam has deep pockets.
Farah Jiminez, executive director of the community development corporation Mount Airy USA, explained it best: If the money didn’t have to repaid or the credit were made a permanent feature of the market, the asking price of houses would be driven up $7,500 by sellers who knew the buyers would be getting it back anyway.
The law is designed to stabilize prices so that values will rise naturally.
I spend a recent afternoon listening to explanation of the tax credit by some officials from the National Association of Home Builders, and, with some added insight from my cadre of economists and other experts, I offer this:
The $7,500 tax credit is available to first-time buyers (defined as those not having owned a primary residence for three years before the purchase) who close on the sale of a house between April 9, 2008, and July 1, 2009. The house must be the buyer’s principal residence.
If you are married and file jointly, the credit is available only if neither you nor your spouse owned a primary residence in the previous three years.
The maximum credit is $7,500. A single taxpayer with a “modified adjusted gross income” up to $75,000, and married taxpayers with incomes up to $150,000, qualify for the full credit.
According to my accountant, before you figure what your modified adjusted gross income is, you first must determine your adjusted gross income.
The adjusted gross income is your salary, plus interest income on savings accounts, stock dividends, tips if you’re a waiter, and rental income on that Shore house you own, added together and appearing on the last line of the first page of Form 1040.
This is the amount before deductions. The adjusted gross income is modified, for example, by any deduction for a regular contribution to an IRA, for student-loan interest or qualified tuition and related expenses, or interest from Series EE bonds that you were able to exclude because you paid qualified higher-education expenses.
If your income exceeds the limit, you may be eligible for a partial tax credit.
The example given is this: An individual buyer has a modified adjusted gross income of $88,000, exceeding the limit by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35.
Multiply $7,500 by 0.35. The buyer is eligible for a partial credit of $2,625.
The tax credit is refundable. That means you can take the credit if you have little or no federal income-tax liability to offset. The feds will likely send you a check for part or all of the credit.
If you can buy a house in 2009, the IRS will let you claim the credit on your 2008 tax return. Thus you have the option of figuring out in which tax year the credit will do you the most good.
As you can see, the angry caller was right: This is a zero-interest loan. To reiterate economist William Wheaton’s comments, “The feature saves the buyer at most just a few hundred dollars a year – the annual value of the forgone interest.”
During the builders’ session, the head of Pulte Homes said this company would match the $7,500. You don’t have to pay it back.

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“On the House” appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com

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RISMEDIA, Sept. 16, 2008-It is a three-digit score that can shape your financial future, whether you plan to buy a new car or qualify for a reasonable mortgage loan to buy the home of your dreams. Your credit score is a determining factor in whether you obtain financing and at what cost, and there’s never been a better time to clean up your credit history and boost your score.
“With today’s tightened credit market and lenders becoming more selective about issuing loans, a good credit score has become more important than ever,” says David Hanna, president of the Chicago Association of REALTORS®. “Lenders consider credit scores when determining the risk associated with a loan application, especially for people looking to buy a home. REALTORS® know well that credit can be the difference between simply finding the home of your dreams and actually buying the home of your dreams.”
The first step in improving your credit score is to know where you stand. Your credit records have been reduced to a three-digit score commonly known as a FICO, or Fair Isaac & Co., score. Each of the three major credit bureaus (TransUnion, Experian and Equifax) have assigned a score that shows how likely you are to pay back a loan on time - the higher the score, the lower your presumed risk of default. By law, you may obtain one free report annually from each bureau online at www.AnnualCreditReport.com. By accessing your credit information one agency at a time, you can get a free credit report three times a year.
The average U.S. credit score is 694, according to Experian’s National Score Index. FICO credit scores can range from 300 to 850 and are based on the length of your credit history, the mix of credit you already have, and your number of recent credit applications.
Once you know your FICO score, you can work toward improving it. But improving your credit score can require time and commitment.
Here are some valuable tips to get you started:
- Pay your bills on time. Your payment history, including late payments and foreclosures, can count for one-third of your credit score. Accounts more than 60 days past due will be indicated on your credit report. As the length of your on-time payments increase, so too will your score.
- Check your credit report for errors. Removing errors, especially those negatively reflecting late payments or unpaid credit, is one of the easiest ways to improve a credit score. Look for expired negative records and file a dispute if necessary.
- Reduce your balances. One-third of your FICO score depends on the total amount of balances you owe versus your total credit limit. Try to keep your balances less than 80% of your credit limit to maximize your score benefit. Start with those credit cards that are closest to their limits.
- Keep older credit lines open. Having a long history of active accounts indicated to lenders that you are a good credit risk. It also accounts for 10% of your credit score. Try to use your oldest cards regularly for small purchases and pay balances each month.
- Use credit - but use it responsibly. This includes having credit cards and installment loans with timely payments. Accounting for 15% of your score, a balanced account including a mortgage payment can help homeowners boost their score.
- Avoid new credit. Opening new credit will lower your average account age. In addition, the number of new applications counts for 10% of your score. Under the Fair Credit Reporting Act, you may limit “prescreened” offers by removing your name from nationwide lists. Apply in moderation and take on new credit only when you need it.
- Check regularly for identity theft. Agencies may only provide your information to those with a valid need, such as a creditor or insurer. In addition, you must give consent for this information to be seen by an employer.
For most, credit is a way of life. Installment payments and credit cards can be useful financial tools if they are kept under control, but many let credit control them.
“A good credit score is a consumer’s financial calling card, and it is important that they do everything they can to boost their score and put themselves on the best financial footing possible,” says Hanna.
For more information, visit www.chicagorealtor.com.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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by Broderick Perkins
When shopping for a home, don't get tripped up by hackneyed marketing phrases like "gourmet kitchen," "diamond in the rough," "needs tender loving care" and "one of a kind."
Too often, such descriptions are subjective euphemisms artfully crafted to get you interested in a property, rather than objective wordsmithing that may actually turn you off.
There's nothing illegal or unethical about the lingo used in real estate marketing -- unless it is purposely deceptive -- but it is up to buyers to see through the veil of the verbiage that comes with the effort to sell homes.
So says the "2008 Report on Home Buying Euphemisms and Lingo," by the National Association of Exclusive Buyers Agents (NAEBA), a group of real estate agents who only represent buyers. And right now, buyers, facing a credit squeeze and underwriting hurdles that make them want to yell "Uncle!" need all the help they can get.
The report stems from an informal survey of association members asked to provide descriptions they found in listing data along with what they actually, physically found when they arrived at the property.
Says the report: "Please note these are individual cases in our agent's experiences. These descriptions may not apply in every case."
Some examples include:
"As-Is" often means the seller isn't willing to perform any repairs or upgrades, not that you can't negotiate defects or other items found during an inspection. A home inspection will give you the true meaning of "as-is."
"Bedroom" can be a small office with or without a closet. All real bedrooms should have a window to the outside.
"Cozy" could mean it's too small for your big-screen TV.
A "fixer-upper" could be a home in major disrepair, one that hasn't been lived in for a decade, a 100-year old home or all of the above.
"FROG" is a term found in listings from the south and southwest that means a Family Room Over the Garage or a bonus room. Be sure the room, if added on or built-in later, was done so with a proper permit and current building codes.
"Light and bright" could mean everything is clinically white -- tile, paint, even flooring.
"Very bright sunny home," could mean there is no shading from trees.
"Walk to schools, shopping and entertainment," could describe a property in a largely retail or commercial district.
The NAEBA says buyers who are attracted to properties because of marketing language should consider how words are used and determine if they best describe the home or if the language is window dressing.
Here are a few things to think about as you evaluate the home in question, according to the NAEBA.
• Does the information in the listing actually add any value to the home or was the terminology used to just get you into the home?
• Does the listing information distract you from another problem with the home? Enjoying the "great lake view" could cause you to miss window framing that's out of plumb.
• Is the listing misrepresenting a feature of the house that should be brought up in negotiation? For example, if the roof was listed as "like new" but is actually 20 years old, it could be a negotiating point.
• How does this listing compare to your other options in the marketplace? There might be another home just down the street that really does have a brand new kitchen of your dreams instead of the "new kitchen" that merely has new knobs, painting and fixtures.
Published: September 18, 2008

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by Debra Allen
Have you ever walked into a beautifully decorated model home and been captivated by it? Did you find yourself dreaming of bathing in that spa-like bathroom, cooking meals in the gourmet kitchen or curling up with a book in that luxurious reading nook? If so, then you have been the successful target of the secret weapon called staging.
As a real estate agent, you know that staging your real estate listings will result in a faster and more profitable sale, but who can you trust to manage this important process for you.
You want the best possible price for your home, but do not want to pay more than your return to achieve this. You need expert and objective home staging guidance that comes from experience and a highly trained eye in order to compete in a buyers market. What you seek is the experience of an Accredited Staging ProfessionalTM (ASPTM).
Staging can entail simple tasks like removing clutter. Clutter eats equity. Stagers aren't maids or house-cleaners; they don't do repairs or paint. Rather they create a neutral, harmonious, spacious, and beautiful environment. They often set tables for dinner so that a prospective buyer can envision themselves in the property having a family dinner.
Think of staging like detailing a car. A smart auto seller would detail a car before selling it to add value. That's precisely what staging can do for a house. As a REALTOR®, I think that staging helps; it makes the property stand out. In turn, good staging can determine which properties sell fast and which do not. It is no longer a market where staging helps the property sell for more. In today's market, it enables the property to have more potential of selling at all. It's a buyer's market, so make your home stand out by creating a sophisticated ambiance.
While some sellers may be hesitant to spend more money on staging in a down market, this is the winning way to get a property sold; and often for a higher asking price.
Professional stagers can see your house as buyers will, and they'll set the scene so that buyers can imagine living there. They're likely to simplify or streamline the furniture in a room for better traffic flow and to enhance its spaciousness. They may neutralize a too-personal color scheme or add touches of color or accessories where needed. In vacant homes that feel cold and lack visual landmarks, stagers often bring in rental furniture to create warmth. This helps Buyers mentally move in and feel that when it's time for them to move in, thy will be able to kick back and relax.
REALTORS® and sellers can hire stagers by the hour or the room. Homeowners typically pay from $200 to $3,000 depending on the level of service required. But the pay-off in time saved and higher sales price can be nice. If all your listings looked like model homes, do you think you'd have an easier time selling them? And do you think they might command a higher selling price? Statistics show this to be true.
Buying a house is largely an emotional decision because people are not just purchasing a home; they are buying a dream ... a lifestyle. If you can help them with their vision so they don't have to rely completely on their imagination, you positively impact how they feel in the home, which will be reflected in the sales price and number of offers you receive. All human beings want comfort, excitement, prestige and love, and all these are at work in the psychology of the home purchase. Effective staging maximizes those feelings, creating an atmosphere that makes people want to linger and imagine themselves living in the space. Ultimately, staging creates a home the prospective buyer will not be able to live without.
People today have busy lives, they want to walk in and look at a home and say, "This is mine. I can move into this home without doing anything."

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