Less maintenance than a townhome, all of the amenities of Liberty Square (and more), one-level living, private entrances . . . . enjoy all of this and more in these 1,300 to 1,800 square foot new condos in Harrisonburg starting at $139,900, built by Scripture Communities.


Click here for more construction photos.

Despite snowy weather, construction is moving along quickly at Founders Way.  Below is a rendering of the finished product.



The first building of (12) condos will be complete in May 2010 or June 2010, thus making first time buyers for an $8,000 tax credit.  PLUS....the builder is offering a free granite upgrade for reservations prior to March 31, 2010.  PLUS....the builder is offering $3,000 of closing cost assistance.

Find out more at FoundersWay.com, call (540-578-0102) or e-mail me, or stop by the Liberty Square model on Fridays, Saturdays, Sundays or Mondays between 1:30 p.m. and 4:30 p.m.

Click here for Founders Way updates via Facebook

Over at HarrisonburgForeclosures.com, I post notices of upcoming Trustee Sales (foreclosure auctions).  The graph below shows how many trustee sale notices we've seen over the past 7 months.



As you can see, there has been a general increase over the past seven months, though it certainly could be a seasonal cycle since I don't have 12 months of data yet.

Do remember that these numbers do not indicate how many properties are actually foreclosed on, but rather the number of properties for which a trustee sale is scheduled --- regardless of whether it ends up taking place.

I'm working to get my hands on data about how many sales actually go through.  Stay tuned!

Somehow, the $8,000 tax credit for first-time buyers is getting all of the attention, meaning that most people don't even know about the $6,500 tax credit available to you if you've lived in your home for five years.

If you have owned your home for five or more years, you will (almost certainly) receive a $6,500 tax credit if you buy your next home by April 30th, 2010.  To clarify -- you must have a contract on the house by April 30th and close by June 30th.

Many people that I talk to who would be eligible for this $6,500 tax credit don't even know that it exists.  If you're in this situation and planning to buy a new house in 2010, you really ought to consider making a move in the first four to six months of the year. 

Click here for more information (from the IRS) about both tax credits.

Again, to try to really drive this point home:  If you've owned your house (and lived in it) for more than five years, you are very likely eligible for a $6,500 tax credit if you buy a new home by the spring/summer.

I recently wrote a post entitled "Is it logical for a buyer to want 10% off of a "fair" asking price in today's economy?" where I concluded:


Yet even given that perspective, there are deals to be had in the current real estate market --- and the buyers who are making aggressive offers are usually the ones finding the great opportunities.

Here are the factors at play:

1. Most homes sell very close to their list price, which prompted the original question: Is it logical for a buyer to want 10% off of a "fair" asking price in today's economy?
2. Many buyers are hesitant to make offers too far off the list price, causing me to describe them as bashful, even way back in February 2008.
3. There are plenty of houses where the seller just won't budge much on price, because they have priced it very close to their bottom line to be competitive.  It's difficult, after all, to Price Competitively, But With Room To Negotiate, which causes The Home Pricing Conundrum: Increasing Traffic At The Expense Of Reasonable Offers

So, again -- most homes sell close to their asking price, but even if a list price has flexibility you need a buyer --- and most buyers are hesitant to offer too far below the list price, but even if they did make an aggressive offer --- most sellers won't budge too far beyond their list price. 

Thus, the stars must align --- a buyer must be willing to make an aggressive offer on a house that just so happens to have a seller who is ready to be overly flexible with their price.  The natural question here is whether this actually ever happens.  It does!  But here's how --- these buyers who want to find that "great deal" often have to make offers on multiple houses before they find the one where the seller will be flexible.

My advice to ALL buyers is to go ahead and make the offer that you think is reasonable, even if you are pretty sure the seller won't take it, and even if you aren't going to then skip around to house after house to find someone who will take your aggressive offer.

If you're buying a fixer upper that you'll live in, you might want to consider the FHA Section 203(k) loan program!

This program allows a buyer to finance their purchase and subsequent repairs into one loan.  The alternative is for a fixer-upper buyer to obtain a secondary or short-term loan to finance the repairs or improvements that they will make after settlement.

You can finance significantly more than the purchase price of the property in order to have cash on hand for repairs.  The funds for improvements are placed into an escrow account, and the buyer (now owner) can draw on them through the rehabilitation process to pay for the repairs and improvements.

There are a few basic guidelines that can quickly tell you whether this might work for your situation:

• This loan program is not for those purchasing investment properties.
• Single family homes, townhomes, all the way up to a fourplex are all acceptable properties.
• The improvements must meet HUD minimum property standards.
• The planned improvements must cost at least $5,000.
• The improvements must start within 30 days of settlement, cannot cease for 30 consecutive days, and must all be complete within six months of settlement.
• You, the buyer/borrower, can do the work yourself, though you can only be paid for the cost of materials.

Of note, the Streamline 203(k) might also be of interest -- it allows for up to an additional $35,000 to be financed for improvements prior to move-in.

I have had clients consider this program, who didn't end up buying a fixer upper.  Have you purchased a house in Harrisonburg (and surrounding) using this loan program?  Or do you know someone who has?  Please share!

It seems that there are quite a few people in our current market who want to buy a house --- but they're at a standstill, because they have to sell their current home before they can buy.  It can be a challenge to buy and sell simultaneously, as I pointed out this past September.

But maybe there's another way . . .

I market several neighborhoods of new homes for Scripture Communities, and just recently the builder (Jerry Scripture) has devised a move up program that has worked for him in the past, and is working again now in our current market.

The concept is this: In certain circumstances, Scripture Communities will help you sell your current home, or will even commit to buying your home, if you are buying a new home in a Scripture Community.  Does it sound to good to be true?  It can be of tremendous help to someone who wants to buy, but most sell in order to do so. 

As a real, live, example --- we're in the process of building a home now (at Heritage Estates) for someone who is using the Scripture Community Move Up program.  If they can't sell their current home themselves by the time their new home is complete, Scripture Communities will buy it from them at an already agreed upon price so that they can close on their new home.

There are a few common sense guidelines that we're using when considering these move up scenarios:

• The buyer must be moving up, with a decent margin between the house prices.  It can make sense for Scripture Communities to buy a $200k house to allow someone to close on their purchase of a Scripture Communities $300k house.  Likewise, it can make sense for Scripture Communities to buy a $275k house to allow someone to close on their purchase of a Scripture Communities $400k house.
• The buyer (and builder) must be reasonable in deciding on a purchase price for the buyer's current home.  Scripture Communities will buy (or consider buying) a house a price that is agreeable to all parties --- but sometimes an agreement can't be reached.  
• This won't work for every situation, but it can work for many seller-buyers.  Scripture Communities can't buy every or any home for someone who hopes to buy at one of these new communities, but we'll certainly try to make it work for you to help with your housing transition.

As a reminder, here are the new communities where a move up scenario might work:

• Heritage Estates (55+ community with pool, French Country architecture)
• The Glen at Cross Keys (paired homes from the mid $200k's)
• The Cottages at Stone Spring (energy efficient homes in the $200k's)

Every investor (or potential investor) comes to the table with different expectations for an investment property that they may choose to purchase.  A few examples of this broad spectrum include:

Having One's Cake And Eating It Too!

• Minimum Investment: 5% to 10% maximum
  
• Generous Positive Cash Flow: $200+ / month
• Professional Property Management included as an expense
  
• Maintenance Contracted Out included as an expense

Investing At Any Cost

• Flexible Investment: 20% to 30% acceptable
• Negative Cash Flow: a loss is ok, given tax savings and principal reduction
• Self Managed: no professional property management
• Self Maintained: no outside maintenance costs

A Reasonable Middle Ground

• Realistic Investment: 20% on most deals
• Neutral Cash Flow: possible slight loss in Year 1 - 3
• Self Managed: no professional property management
• Some outside maintenance costs for significant repairs
  

But let's take this outside the realm of reasonable:

• The Cake Investor won't buy anything in Harrisonburg
• The At-Any-Cost Investor will have many choices in Harrisonburg
• The Reasonable Investor will have a few choices, over time

Before 2005 (or 2006), the ratio between sales prices and rental rates allowed for investors to have their cake and eat it too.  This brought a rush of investors into the Harrisonburg market, many of who bought new construction and existing townhouses.  But sales prices have increased 49% over the past six years, and rental rates have not.  Thus, the profit margin for investors has been declining steadily for the past few years, leaving most purchasable investment properties not as palatable for most investors.

Put more specifically in today's context, most rental properties that an investor could purchase in Harrisonburg today will offer (how exciting!) negative cash flow --- even given a 20% down payment, self-management and self-maintenance.  This leads me to two questions every potential investor should be asking....

1.  Should I be investing in real estate in Harrisonburg?
If you are seriously considering investing in real estate, Harrisonburg is a great place to buy.  While there are still some who believe our home values will eventually, somehow, start falling rapidly, we have seen relatively stable home values over the past several years despite the majority of the country seeing sharp declines.  This is likely attributable to our low unemployment, a diverse economy, multiple local colleges/universities, and our proximity to D.C. --- all of which are great economic stabilizers that benefit real estate investors in this area.

2.  What should I be buying as an investment property in Harrisonburg?  And how should I be buying it?
First, you'll need to be patient.  As stated above, most properties currently for sale won't be very exciting, even given reasonable investment goals.  However, there are, and there will continue to be some properties that can work well --- providing positive cash flow, likely appreciation, a stable tenant base, etc.  To properly evaluate such opportunities, however, you'll want to (in my opinion) become comfortable with analyzing the properties and their potential financial benefits through several different lenses (cash flow, tax benefits, principal reduction, appreciation).  Read up here for more details.

If you are considering purchasing an investment property in Harrisonburg, I'd be delighted to assist you in that process.  Get in touch (540-578-0102 or scott@HarrisonburgHousingToday.com) and we can start to discuss your situation and goals. 

Keston recently commented here as follows:


I can follow Keston's logic --- if prices went up 10% per year (or more) as the housing market accelerated, why shouldn't prices go down 10% per year (or more) as the housing market decelerates?!!  Here are my thoughts:

First, I definitely agree with Keston that it is very logical for a buyer to want 10% off a fair asking price. 

Furthermore, I imagine those logical buyers are quite perplexed (and perhaps frustrated) that prices haven't fallen by 10% a year as the market has declined.  The law of supply and demand definitely suggests that prices should have adjusted as demand so drastically declined over the past three years.

But, given that prices haven't fallen in this area, let's examine what is likely happening as those logical buyers try to buy in our local market with the perspective that they ought to be able to negotiate 10% off an asking price.

• The the past three months, 224 residential properties have sold in Harrisonburg and Rockingham County. 
• These 224 properties sold, on average, for 96.37% of their asking price.  Thus, on average, buyers only negotiated 3.63% off the asking price. 
  
• Of the 224 properties, only 19 properties (8.5%) sold at a price of at least 10% below their asking price.  
• Of the 224 properties, only 5 properties (2.2%) sold at a price of at least 15% below their asking price.
  

So, what's a logical buyer to do?  There is nothing wrong with wanting to negotiate 10% off an asking price, or with making offers given such logic.  But such a buyer should know that they may have to make an offer on ten or more properties before they find a seller willing to negotiate 10% or more below their asking price.

If you own your first home now, and are looking to move up to your next home --- I urge you to carefully examine the potential benefits (and risks) of keeping your current home instead of selling it.  Your first home is likely an ideal rental property, and you can see enormous returns if you are able to keep your current home as a rental property when you purchase your next home.  That being said, I know that many people need to sell their current home to use the proceeds of that sale to use as a down payment for their purchase.

Scenario #1 -- Sell After Five Years

We'll imagine that your home was a townhouse bought five years ago for $110k, which is now worth $155k.  In selling the property, you will clear about $42k after closing costs.  (Assumptions: 100% financing at 7% fixed, five years of principal reduction, 6% gross closing costs) 

Net Gain After 5 Years Of Residency = $42,000

As you can see, this is a hefty payoff after just five years.  Certainly, even if you didn't need the funds to roll into your next purchase, it would be tempting to "cash out" by selling your first home.


Scenario #2 -- Sell After Ten Years (total)

We'll again imagine that your home was a townhouse bought five years ago for $110k, which is now worth $155k.  However, instead of selling the property, you rent it for $875/month, with a super conservative 1% per year increase in rental rate.  We'll also assume that your insurance, property taxes, and property value go up 3% per year.

If you keep the property for another five years after moving into your new home, and then you sell it, in addition to getting the roughly $42k out that you would have netted after five years, you'll also likely experience:

• $3,964 of monthly excesses due to increases in your rental rate without corresponding increases in the principal and interest payment on your mortgage.
• $9,151 of mortgage principal paid down by your tenants
  
• $24,697 of appreciation after five more years of 3% per year increases

Net Gain After 5 Years of Residency, 5 Years of Renting = $79,812


Scenario #3 -- Sell After Thirty Years (total)

But what if you kept it all the way until the end of the 30 year fixed rate mortgage?  Then things would be looking excellent!  In addition to getting the roughly $42k out that you would have netted after five years, you'll also likely experience:

• $37,950 of monthly excesses due to increases in your rental rate without corresponding increases in the principal and interest payment on your mortgage.
• $103,545 of mortgage principal paid down by your tenants
  
• $169,536 of appreciation after twenty-five more years of 3% per year increases

Net Gain After 5 Years of Living In, 25 Years of Renting = $353,031


The Risks

Certainly, as in any investment scenario, there are risks.  Here are a few:

1. Buying your second home without the funds from your first home might stretch your budget tight and make it difficult to cover the mortgage payments on your first home if it remains vacant for several months.
2. You'll have to be a landlord, and deal with finding tenants, collecting rent, possibly evicting tenants, and getting calls in the middle of the night about an overflowing toilet.
3. Having your capital tied up in two properties could limit your ability to make other financial moves or decisions in life.

The Benefits

I believe the benefits CAN outweigh the risks, depending on your own personal financial scenario.  Instead of cashing out after 5 years for $42k, you can have tenants pay off the remainder of your mortgage, while you get to enjoy the monthly excesses as rental rates go up, and you eventually get to realize the appreciation of the property.  After 30 years, you are likely to have received a net of $353k instead of just $42k.  Wow!

There is often confusion about what it means to "buy a foreclosure" -- and it really all revolves around whether your potential purchase is happening before, at, or after the Trustee Sale.  The Trustee Sale is the sale of the property on the courthouse steps to the highest bidder as a result of the borrower's default on their loan.

BEFORE THE TRUSTEE SALE

If a property is headed towards foreclosure, you may be able to buy it before it is sold on the courthouse steps.  Sometimes a property headed towards foreclosure is on the market during that pre-foreclosure time period, so you could go tour the home, make an offer, and follow a traditional path towards purchasing the property.  It's important to realize, however, that if a homeowner is headed towards foreclosure they are likely to be in a "short sale" scenario.  A short sale is one in which the proceeds from the sale won't be sufficient to pay off the money owed against the house.

If you are considering a property that would be a short sale, you may want to brush up on the typical timing of a short sale in Virginia.  It's also crucial to know that there will be lots of uncertainty in trying to buy a short sale property because you'll be waiting on approval from the owner's lender, which can take weeks or months.  During that time, other offers can come in, the property can be foreclosed on, etc. 

You'd know about these properties by reviewing notices of future Trustee Sales, or by asking your Realtor to look for properties in the MLS where a short sale is noted. 

AT THE TRUSTEE SALE

This is where all the action is --- or not!  Most trustee sales that I have attended do not have any bidders who exceed the bank's minimum bid.  That is to say that the lenders typically take the properties back at or close to the amount of the outstanding loan balance.  If the loan balance is a decent amount below perceived market value, then there may be bidders, but this is usually not the case.

The uncertainty in buying at the Trustee Sale is that you usually will not have viewed the property (so you won't know the condition), and you won't be able to make your offer/contract contingent upon a home inspection.  Thus, you're buying sight unseen, and as is.  Quite a dangerous combination, which makes most potential bidders hesitant to bid too high, as they don't know what types of repairs they may have to make to the property.  You'll also need to be prepared at the Trustee Sale with a cashier's check in hand, and be ready to close within just a few weeks.

AFTER THE TRUSTEE SALE

If you're "buying a foreclosure" after the Trustee Sale, you're really buying a bank owned property.  That is to say that the lender was not able to sell the property on the courthouse steps, and thus have it back on the market after having foreclosed on the original borrower.  Oftentimes, the new owner will not be the actual lender, but an asset management company.

Some asset management companies will price the house quite evenly with the market, and try to sell it in a reasonable, but not overly fast time period.  These properties are much like other properties on the market, except that they are owned by a bank or asset management company.  Other lenders or asset management companies will list the property at a price where it is sure to sell quickly, and likely with multiple offers.  A property such as this came on the market in Bridgewater this past week, and there were three offers on the property within the first few days of having been listed.

Buying a bank owned property is relatively straight forward, though you may be dealing with multiple competing offers, you will definitely be dealing with lots of extra paperwork and disclosures from the bank, and you may be dealing with a slower than normal process for negotiations and closing.

IN SUMMARY

If you have been encouraged to "look at some of those foreclosure properties" or think that your best opportunity might be a "a foreclosure" -- maybe you should, and maybe it is.  But bear in mind that the process, the risks, and the certainty of the purchase will vary quite drastically based on whether you buy before, at or after the trustee sale!

I rarely make real estate sales predictions --- mainly because in the rare occasion that I do, I'm usually wrong.  More on this in a few days.  That being said, I believe we're seeing the specific effect of the $8,000 first time buyer tax credit (that was recently extended) here in Harrisonburg and Rockingham County. 

Check out how November sales figures will likely play out . . .



We've already seen 34 home sales in Harrisonburg and Rockingham County in the first 17 days of November.  Compare that to how many occurred in Nov 1-17, 2008 versus Nov 18-30, 2008, and I have extrapolated a final sales count of 65 home sales this November.  I will likely be wrong --- I think it will be even higher.

The second version of the first time buyer tax credit was to end on November 30th, so there are quite a few purchasers already in the queue waiting to close at the end of this month. 

Do you want further evidence? The median sales price of the homes that have sold this month is $177,623, compared to the year to date median of $190,000.  We're seeing more inexpensive (first time buyer type) homes selling this fall.

Any counter prediction out there?  What do you think?  And what do you think we'll see in those typically stagnant months of December and January??

THE NEW TAX CREDIT IS COMING, THE NEW TAX CREDIT IS COMING!
The House has passed the bill, as has the Senate, and the President may sign it as soon as tomorrow (November 6, 2009).  That's right --- the tax credits for home buyers are continuing --- and now they are being applied more widely.

FIRST-TIME BUYERS
You now have several more months to buy your new home --- you don't have to close by Nov 30 / Dec 1.  In fact, as long as you have the property under contract by April 30, 2010, you'll have until July 1, 2010 to close on the property.  The tax credit is still $8,000 with several imitations on income, home price, etc.

LONG TIME RESIDENTS OF SAME PRINCIPLE RESIDENCE
There's something for you too!  If you have owned and used the same residence as your principal residence for 5 (consecutive) years out of the last 8 years, you will likely be eligible for a $6,500 tax credit.  The deadline for closing is July 1, 2010 (as long as the property is under contract by April 31, 2010.)

TIMING
One important note here on timing --- if you're a first-time buyer, this new bill just extends your deadlines.  If you're a "long time resident of same principle residence" you'll can close on your new house (and be eligible the tax credit) as soon as the bill is signed into law.  That is to say that if you're a move-up (or down) buyer ready to close tomorrow (November 6th), you might want to wait another few days for the President to sign the bill.  You'll enjoy an additional $6,500 net gain --- in the form of a tax credit.

INCOME LIMITS
The new income limits are $125,000 for single buyers and $225,000 for couples.

THE ACTUAL LEGISLATION
Interested in the details of the actual bill?  Click here.

Many (many, many, many) townhouses were built in Harrisonburg between 2002 and 2007.  They are still being built, but not at the same pace.  The principal reason for this shift in building is that home values increased faster than rental rates.  As such, a smaller and smaller pool of investors are considering purchasing townhomes as income generating properties --- though that may be changing again.  Let's see how things compare when buying an income generating property in 2002 versus today.

In 2002, a new two-story townhome in the City could be purchased for roughly $100,000, and rented for approximately $725/month.  Here's how the annual cash flow looks:

As you can see, this is a barely break even scenario using the conservative calculations above, though more positive cash flow was achieved by most investors by managing the properties by themselves, and because very few repairs were needed.

Fast forward to 2009, and here's how the cash flow might look on a new two-story townhome in the City that can be purchased for roughly $150,000, and rented for approximately $900/month:


As you can see, an investor would now have to bring more than 20% as a down payment to even break even in this townhome scenario.  There are plenty of investors who do bring more than 20%, or who pursue other properties with better cash flow characteristics, but hopefully this is indicative of how the investment property landscape has changed over the past seven years. 

But --- perhaps some of those investors are, or should be, looking at the Harrisonburg market yet again.  You see, there are quite a few townhouse owners who bought back in 2000, 2001, 2002, or 2003 who bought when townhouse prices were very low.  If they haven't refinanced, or taken out a home equity line of credit (HELOC), they likely have a loan payoff significantly below what the market will bear for their townhouse.  Thus --- there are deals to be found with investment properties right now in Harrisonburg.  They won't always jump out at you, as they may be listed at reasonable "market price" --- but if the owner is motivated to sell, and they bought 7-10 years ago, they likely have quite a bit of equity with which they can negotiate.

If you are looking for an income generating property, feel free to call me (540-578-0102) or e-mail me (scott@HarrisonburgHousingToday.com) and I can assist you in determining whether we can meet your investment goals given the opportunities in today's market.

It's hard to come by a decent sized, relatively new, sub-$300k home in the Peak View Elementary school district.  This is the highest growth area of the County, and most homes being built in this school district are priced above $300k (some are way... above $300k).  So, what's a buyer to do??

The home pictured above fits this bill, and is energy efficient to boot, as an EarthCraft certified home.

What on earth is an EarthCraft home, you might ask?  They are homes that (in varying degrees):

• are more healthy than most homes
  
• are more comfortable than most homes
  
• have lower utility bills than most homes
  
• protect the environment more than most homes

This particular home, achieves these standards by incorporating the following materials, features and design standards:

• Long life, low maintenance Hardie Plank fiber cement board siding
• Very low building envelope leakage (< 0.25 cfm50 / square foot)
• Polyurethane spray foam closed cell insulation (along with traditional fiberglass insulation)
• Low-E windows (U-factor < 0.35)
• Air handler and ducts located within conditioned space
• Very low duct leakage (< 4% of floor area served leakage outside)
• Flourescent or CFL bulbs throughout
• EnergyStar bath fans, light fixtures and ceiling fans
• EnergyStar dishwasher, refrigerator and clothes washer
• Recycled hardwood floors and carpet
• Water sense delta faucets and high efficiency shower heads
  
• TOTO Drake high efficiency toilets
  
• Low VOC paint Aura paint by Benjamin Moore
• Permeable pavers on the sidewalk and back patio
  
• Permeable driveway
• Rain barrel for water run off

There aren't too many EarthCraft homes in this area in this price range.  So if you're looking for a green, energy efficient home in Harrisonburg, be sure to check out The Cottages at Stone Spring.

Also of note, there will be six other homes built in this neighborhood.  If you are interested in building your own EarthCraft home, come take a tour of this existing home, and then we can discuss other house designs, etc.

Why do people buy homes?  In a context stretching prior to 2002, people bought homes mostly because they needed a place to live --- and buying a home provided stability (your landlord won't kick you out), and had some financial side benefits (gradual appreciation, tax deductions).

However, the paradigm of the American dream of home ownership shifted in the beginning of the 21st century when home values started to inflate by 10% - 50% per year in many markets.  All of a sudden people weren't just buying houses because they needed somewhere to live --- but also because it would be an incredible investment. 

This new paradigm can be paralyzing to buyers in today's market.  Certainly, people still need a place to live --- but now some buyers become hesitant and unable to act absent confidence that they will also have a strong financial return.  I don't fault any buyer for desiring a good return on a home buying investment --- but I don't believe that keeping this new expectation on the forefront of our decision making is sustainable.

Let me be more precise:

• I don't think it's wise for an otherwise qualified buyer to stay on the sidelines (and not buy a house) when the only reason why they're in that position is because they're concerned they might not see a 10% gain in the value of their home each year.
• I do think it's wise for an otherwise qualified buyer to examine the ways that a home's value could change in the short and long term future before making a decision to purchase.

Stated one other way, I don't blame someone for waiting to buy if they think a home's value might drop --- but if you aren't buying because you think you might only see a 3% per year increase in home value instead of 8%, I think you need to reign in your expectations.  The astronomical per-year "gains" in home values during this decade are not the new status quo --- they were an exception that we are not likely to see again.

PLEASE NOTE:  This post has been updated since it was originally published to reflect my now more thorough understanding of this issue based on additional input from some of the fine administrators from JMU. 



I frequently receive questions from the parents of JMU students asking whether they can buy a property in Harrisonburg as an investment property in order to qualify for in-state tuition rates.  If this seems like a far-fetched idea, check out the difference in tuition....

• In-State Full Time = $6,964 / year
• Out-of-State Full Time = $18,458 / year

So....can it be done?  Can a JMU student qualify for in-state tuition even if their parents reside out-of-state?  Per my interpretation --- it is not very likely.

First -- if you want to start with the exact details, please check out the State Council of Higher Education for Virginia (SCHEV) web site where they provide a lengthy set of "Domicile Guidelines."

OK -- here we go, the bottom line is that if a student arrives in Virginia in August, is enrolled in JMU and continues to be enrolled in JMU (fall and spring semesters) for several years, then the presumption is still that they are in Virginia for education and not as "bona fide" domiciles.

So...how could a student establish themselves as a domicile in order to enjoy the in-state tuition rates? 

• If the parents physically move to Virginia, establish domicile for a period of one year then they MAY qualify for in-state status if they are a dependent student. 
• If a student marries a Virginia domicile to whom they are financially dependent, they MAY qualify for in-state status.
• If a student has a contract with a Virginia employer when they graduate, they MAY qualify for in-state status, but such a contract wouldn't usually exist until their senior year.

Beyond the parent(s) of a dependent student moving to Virginia and waiting a year (or one of the other small exceptions) it will be difficult.  A student would need to prove that they are an independent student, not receiving substantial financial support from their parents, and they will need to prove that they live in Virginia with domiciliary intent, not just for educational purposes.  As is quite clear, proving domiciliary intent will be difficult --- since they moved to Virginia in order to go to school, and it can be presumed that they are staying in Virginia to continue to go to school.

Of note, SCHEV lists a variety of criteria that may indicate domiciliary intent, but these actions are not determinate in themselves:

• Currently living in Virginia, and having done so for at least a year immediately prior to requesting eligibility for in-state tuition.
• Paying Virginia income taxes
• Holding a Virginia driver's license
• Having vehicles registered in Virginia
• Being registered to vote in Virginia -- -and actually voting.
• Being employed in Virginia
• Owning real estate in Virginia, and thus paying property tax in Virginia

SCHEV's Domicile Guidelines provide several additional criteria and explanations --- read it through fully, as the burden of proof is on the student when alleging qualification for in-state tuition.

My conclusion is this --- even if a student buys a house (or townhouse or condo) in Harrisonburg, lives in it, works in Virginia, pays income taxes in Virginia, has a car registered in Virginia, has a Virginia driver's license, votes in Virginia, intends to stay in Virginia after graduation, and is independent from their parents, that still doesn't necessarily mean that they will qualify for in-state tuition.  The issue, again, is that it will be difficult to prove domiciliary intent when the move to Virginia and continued residency in Virginia is so immediately and directly tied to attending JMU.

PLEASE NOTE:  This is not an official interpretation of Virginia Domicile Requirements, it is solely my interpretation of SCHEV's guidelines to provide a hopefully-useful summary for you.  If you have questions about these issues, contact the following people depending on your scenario....

• Incoming Freshmen should contact the JMU Admissions Office.
• Current Students should contact Linda Combs.
• Incoming Graduate Students should contact KathyThompson.

There has been talk for some time about using the $8,000 home buyer tax credit as a down payment or for closing costs, but the details have been few and far between.  How, however, VHDA has created a specific program for this purpose, which makes it quite a bit easier...

Instead of waiting until you file your taxes next year, you can receive the $8,000 tax credit at closing if you are obtaining your mortgage through the VHDA program.  The $8,000 becomes a second mortgage with no interest and no payments for 12 months.  Thus, the $8,000 loan costs you nothing, and stretches the loan of the money through the time when you'll get the tax credit.

Providing even more flexibility, when you do get your $8,000 tax credit, you can either:

• Pay off the $8,000 second mortgage that helped with your closing costs and down payment.
• Keep the $8,000 tax credit cash for emergencies, home improvements, etc. and pay off the $8,000 over the remaining 29 years of your first mortgage at the same interest rate as your first mortgage.

A few caveats.... the second mortgage ($8,000) can't be any more than 5% of the sales price.  Thus, if you're buying a home for less than $160,000 you won't be able to borrow the full $8,000 from VHDA.  Also, you can't receive cash back at closing --- you have to use all of the loan at closing for down payment.  But don't worry --- in either of those scenarios, you'd still get the full $8,000 tax credit when you filed your taxes, you just wouldn't have borrowed all of it at closing.

Click here for the full program flyer.
 

If, as a first time buyer, you close on your purchase of a home by November 30, 2009 you will receive an $8,000 tax credit on your 2009 taxes.  That is to say that:

• if you owe the IRS $8,000 you won't have to send them a dime
• if you owe the IRS nothing, you'll get an $8,000 check
• if you are owed a $2,000 refund, you'll get $10,000!

But this only works for you as a first time buyers if you close on your new home by November 30th of this year. 

Most homes take 45 to 60 days to "close" -- in other words, it is usually 45 to 60 days after a house is under contract that the closing can take place.  That means first time buyers ought to have their house under contract by September 30th in order to have time to close.

And if you're planning to have a contract on a house before September 30th, NOW is the time to start looking.  Lots of first time buyers are certainly in the market right now --- I'm working with quite a few, and I hear stories of many others as well who are buying --- but I believe there are quite a few other first time buyers who are still sitting on the bench.

If you have questions about the $8,000 first time buyer credit, or if you're ready to start looking at properties, call (540-578-0102) or e-mail (scott@HarrisonburgHousingToday.com) me and we'll get started!

We've all (hopefully) heard of the $8,000 tax credit for first time home buyers --- if you haven't owned a home in the past three years you can receive $8,000 if you buy one by November 30th of this year (6.5 months to go).

But yesterday, the HUD Secretary announced that the Federal Housing Administration is going to permit buyers to use the $8,000 tax credit as a downpayment! 

More details will be forthcoming -- check with your lender in the coming weeks to see how this might work for your situation.

Interest rates for a typical 30-year loan have never been better --- since they started being recorded in 1970.  They're hovering just below 5% right now --- could they go lower?

Of note --- rates for the purchase of an investment property may be as low as 5.25% on a 30-year fixed rate mortgage.  This was a quote from Debbie Huntley (540-568-1056) at SunTrust Mortgage yesterday (4/24/2009).