Open House by Jim Woodard

Short-sale homes are now more viable purchase transactions than they have been in past months.

Short sales are homes where the current mortgage balance is more than the market value of the property, and the lender has agreed to discount the loan balance to make a sale more feasible. These situations, commonly known as "underwater" or "upside-down" homes, are experienced by about 14 percent of today's homeowners, according to a report on Zillow.com.

Lenders are increasingly recognizing that it costs less to reduce a mortgage's balance than to pay all costs involved in the foreclosure and marketing process. Thus, lenders are more agreeable to short-sale arrangements. This will result in more of these distressed homes being offered on the market by very motivated sellers.

One advantage of purchasing a short-sale home as opposed to a foreclosed property is that in most cases these homes are still occupied by their owner. Therefore, they are much more likely to be well-maintained and in good condition.

For the seller, it's an opportunity to avoid problems related to foreclosures, including a serious negative impact on their credit record. There will still be a negative effect with a short sale, but not as serious as with a foreclosure.

It should be noted that there may be a tax consequence related to the amount forgiven by the lender, especially if it's a vacation home or investment property. Check with your accountant on this issue.

On April 5, the Obama administration will further encourage delinquent borrowers to avoid foreclosure and instead give up their homes in short sales by streamlining the process, according to a report in The New York Times. The program will offer cash payment to the homeowner as well as to the servicer and second-lien holder. And borrowers will be protected from future lender lawsuits for the unpaid mortgage balance.

Q: Is it too late to obtain a tax credit on a home purchase?

A: Home buyers can still take advantage of the $8,000 first-time home buyer or $6,500 repeat buyer tax credits, but they must act quickly.

"It's not too late to take advantage of the home buyer tax credit," said Bob Jones, chairman of the National Association of Home Builders.

"There are plenty of existing homes on the market, and even though the move-in-ready newly constructed homes inventory has dwindled, builders may still be able to finish a home in time."

The IRS provides an additional two months beyond the deadline to close the deal. Buyers who sign a sales contract by the April 30 deadline are still eligible if they close the sale of the home by June 30, a NAHB report noted.

More people than ever before are eligible for a home buyer tax credit. NAHB estimates that close to 70 percent of all potential buyers should qualify for some form of a credit.

"First-time" buyers don't have to be buying their first home ever; they are defined by the IRS as those who have not owned a principle residence in the past three years.

Repeat buyers may be eligible for a new $6,500 credit, as long as they have owned and lived in their current home at least five consecutive years out of the past eight years.

The current credits also increase the income limits, enabling single taxpayers with incomes up to $125,000 and married couples earning up to $225,000 to potentially qualify for a full credit.

Q: Are home prices going up or down?

A: Home prices for all housing types are virtually unchanged from a year ago. Distressed homes, accounting for about 38 percent of sales, continue to distort the median price because they typically are discounted in comparison with traditional homes in the same area.

The median existing single-family home price is down by about 0.4 percent from a year ago.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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