Many times while I’m showing houses this question comes up; “What’s a tax abatement?”  Many people don’t know what it is, yet its one of those terms we throw around assuming that everyone knows.  Essentially its a reduction of taxes or an exemption from taxes granted by a local government on a piece of real property for a specified length of time.

In Cincinnati we have a great tax abatement program for not only new construction but for renovations of an existing property.  Why would Cincinnati want to do this?  Well, programs like these stimulate revitalization, retains residents, and attracts new homeowners to our city.  The program also provides a benefit for residents who improve their homes and encourages home shoppers to buy in the City of Cincinnati.  Along with the reinstatement of the HIP loan program, this really sparks renovations all around town.

So what’s the 411 on Cincinnati’s tax abatement incentive program?

Who:  Any homeowner in the City may be eligible for property tax abatement if they have renovated their home or purchased a newly constructed home. 

What:The home must be either a condominium or a one, two, or three unit residential structure. For multi-family units that are four units or greater, see  Commercial CRA Tax Abatement.

Renovations:  Improvements made to your property resulting in an increased property valuation qualify for tax abatement.  However, you’ve got to be careful on what increases the value and what is actually just normal maintenance of the property.  See my post on improvements vs. maintenance for some clarification.  For example if you bought a house at 100,000 and made 50,000 worth of improvements.  You won’t have to pay taxes on the increased value of the home at 150,000 for the next 10 years!  You are only responsible for paying taxes on the 100,000 amount.  That a great incentive to improve your existing property, especially since home sales have been a bit sluggish the past few years.

New Construction:  This pertains to new construction of structures containing a condominium or a one, two, or three unit residential structure and are eligible for a 10-year abatement up to a maximum $275,000 market value.  You will pay tax only on the land and the value above $275,000.  Here is a good example of the estimated tax savings:

     Total Investment Eligible for Abatement (fair market value): $275,000
     Assessed Value/Taxable Value is 35% of fair market value: $96,250
     Assessed Value Multiplied by Tax Rate (.05694): $5,480.48
     10% Rollback: $548.05
     Estimated tax abated for one year: $4,932.43

GREEN Construction:a longer tax abatement is awarded for those going green.  Those that are eligible are one, two, and three-unit residential structures, including condominiums.  This abatement is for 15 years (if newly constructed) and 10 years (if renovated).  There is also a 100% tax abatement for residential buildings valued up to $500,000 that are constructed to LEED standards within the City of Cincinnati. Homeowners will pay tax on the land.  WOW Cincinnati really is going green fast.  This is one of the most aggressive tax abatment incentives in the country.  For more information on green building in Cincinnati visit my environmental blog at: www.encorecincinnati.com

To see if you’re elidgable for a tax abatement or for more information visit the city of cincinnati’s website.

An Article appeared in the NY Times today with Cincinnati as the main city of focus for streetcars!  Wow what great press for our city.  To show the world that we are hip and moving along with the rest of the country.

For those who are already familiar with the street car debate, there wasn’t much new information as to why cities all across the country are opting for this mode of city transport.  Of course there are the critics of the system as there are with any other major city building project needing this amount of public funding.  But there is one thing all Cincinnatians can agree on, is that we do need some form of non bus public transport to get people moving around our downtown area. 

I’m just happy to see such positive press for our city in the NY Times!

Now only if I can get the street cars to come all the way up to Norwood….

We Cincinnatian’s love our food!  We’ve got so many local flavors and restaurants that I almost can’t keep up!  Each part of town has their own special restaurant or dish.  Dow town is bursting with new restaurants every time I turn around.  Sometimes my love of food over takes me that I think maybe I should have been a food critic.  However, I quickly extinguish that thought and turn myself back to food and the joy of trying new flavors and cuisines.

This got me thinking about our local food rivalries. 

If you’ve spent anytime in Cincinnati you know them and you know them well.

In the Ice Cream corner we’ve got:

Aglamesis vs. Graeters

Aglamesis Ice Cream is celebrating its 100 year anniversary this year!  You can visit their 2 store locations (Oakley Square and Montgomery).  Once you step foot into them you feel instantly transported back to an old fashioned ice cream parlor.  I love the quaint shops with the pink & black motif and the smell of homemade candy and ice cream.  I highly suggest their ice cream soda’s.  My dad who grew up going to the store in Oakley turned me on to these and I simply can’t resist!

Graeters upon first glance seems more popular than Aglamesis.  Sure Oprah named it her favorite ice cream, but I still wonder if it really is her FAVORITE.  They’ve got stores located all over the tri-state region.  They are known for their rich and cream ice cream with their mega big chocolate chunks inside.  It definitely can’t be for the weak of heart. 

And as far as Cincinnati style chili goes you’ve got:

Skyline Chili vs. Gold Star Chili

For my friends who have never had it, they’re very curious as to why you would put chili on spaghetti!  “Its a Greek style chili,” I tell them, “just try it.”  Quickly they fall in love.  I even had regular “Chili dog Coney days” in college (I went to school down south), so that my friends down there could enjoy the taste!

While each restaurant has a very similar menu and to an outsider they’ll think they’re one in the same.  We native Cincinnatians know they’re not.  You could ask anyone who has lived here for a while which one they like better and why and I bet they could tell you.

But to truly make up your mind, you’ve got to try them all for yourself… 

Any other food rivalries I’m missing?

Sometimes the hardest part of my job is actually getting buyers and sellers to agree. I’m constantly amazed at what happens “behind the scenes” and how if buyers and sellers actually talked to each other during negotiations, many deals would never take place. True there are the “easy ones” that come together without much effort, but those are the ones that we agents dream and hope for.  Those are few and far between.  Much of the time buyers and sellers are so emotionally charged and involved that its hard for them to see the bigger picture.  Thats where agents come in.  We aren’t emotionally involved with your house, we aren’t selling the home of the past 10 years where we raised our children, nor are we purchasing our first house after the wedding and are planning on starting our lives together in it.  We are simply helping people achieve these dreams. 

So what do you do if you’re having trouble disconnecting yourself from your home?  Listen to your agent - assuming that you have a good one.  They’re your voice of reason.  They can help you figure out if the deal that you’re presented with is a good one or a bad one.  If its a price issue - look at what the comparables say.  What was the price range your agent gave you when they first listed your house?  Most of the time when I go and list a house, I give a range of where I think it will sell based on the current data.  Am I right all of the time?  No, but most of the time we fall within that range.

If you’re presented with an offer, my number one advise is to ALWAYS COUNTER.  If you’re a seller and your presented with a “low ball” offer; COUNTER IT.  Don’t reject it.  You never know where it will lead.  You should be happy you have an offer on the table right now.  Although homes are selling in Cincinnati, you will never know when the next offer will come along.  Don’t get offended by a low offer, its business.  Even if you know that “you’re right” and the other side is wrong.  Come up with ways to make the deal work.  Afterall, its your goal to either sell your house or buy a house.  I’ve seen too many deals lost over small things during inspections or over a couple thousand dollars.  Where in the grand scheme of things they didn’t really matter.

Negotiations can be tough for everyone involved.  Make sure you’ve got an agent who does at least 10 deals a year.  There are a lot of part time agents out there and when it comes to your biggest investment you want someone who has experience on their side.

ABSOLUTELY you can over improve.  I’m so scared of over improving, I almost don’t do anything!  But I may just be neurotic because I see so many people over improve their homes and then expect to make every penny back out of the house.  I’m kidding of course, but it brings up a valid point.  You CAN over improve.

First things first: Improvements are not equal to Maintenance.  Many people get these things confused.  They think that they spent 10,000 on a new roof 2 years ago that their home is now worth 10,000 more.  WRONG.  This is called maintaining your property.  If a new roof is needed, its your obligation to put one on; if the outside needs painting, you’ve got to paint it.  Improvements are upgrades to kitchens or baths, adding a deck or an addition, etc…

When it comes to improvements lets get one thing straight; We fix our homes up the way we want to because we want to make our living spaces more enjoyable.  If you want to deck out your kitchen in the latest and greatest, you do it because you want to.  Not because you think, I’ll make ALL of this back when I go to sell.  Will you make some of it back? Most likely yes, but it depends on when you go to sell.  If you spend 20k on a new kitchen and then try to sell a year later, you probably won’t get it all back.  I sold a home last year where the seller put almost 10,000 into their only full bathroom.  Mind you this was a modest 2 bed home where none of the competition had baths like this.  It truly was spectacular.  Almost home-a-rama like.  Did it allow me to command a bit of a higher asking price.  You bet.  Did the seller reclaim all that was put into the bath originally? No.  My question to them when we went to price the house was; Would you have put the bath in last year knowing you were going to sell this year?  They said yes, they enjoyed every minute of the bath.  Then I said “you got your money out of it.”  You did it because you enjoyed it, not because you thought it would increase your home value by 10K.  Of course you always hope, but the reality isn’t always so.

When it comes to your home and recouping money out of it, you never want to be the biggest and best on the block.

Today in our sales meeting a large chunk of our time was spent talking about the housing relief bill that is on the presidents desk waiting to be signed. Our loan officer Kathy Kappes put together a wonderful presentation for us so that we could update all of our current clients on the situation and let future clients know how this may effect them and their future purchases.

Here is a bit of a review as far as the financing aspect is concerned:

The FHA section below lists changes included in the Omnibus Housing Bill passed last Saturday by the U.S. Senate.  President Bush has indicated he will sign the bill this week.  The conventional financing section lists changes impacting current FannieMae and FreddieMac underwriting guidelines.

FHA Financing

• No longer need to wait 90 days to sell a bank-owned property.  Bush administration has announced a “temporary” policy that allows for the immediate sale of vacant foreclosed properties.
• Down payment requirement will increase from 3% to 3.5%.
• Down payment assistance programs (DAP) will be terminated 10/1/08 (i.e, no more AmeriDream or Neimiah).
• Risk-based mortgage insurance moratorium effective 10/1/08 (i.e., everyone will pay same PMI rates regardless of credit score).
• New loan programs to assist distressed homeowners with up to 90% LTV refinance.  Limits will be placed on income and debt to income ratio.
• Nationwide mortgage licensing system established for loan originators.
• Lesser of $7,500 or 10% of purchase price tax credit available to first-time buyers.  Income limits will apply.  Tax credit will be in the form of a 15-year interest only loan.

Conventional Financing

• Chapter 7 bankruptcy–time period to reestablish credit is four years.
• Chapter 13 bankruptcy–time period to reestablish credit is two years if successfully completed.
• For borrowers with more than one bankruptcy filing in the past seven-year period, a five-year elapsed time period is now required.
• Due to the increased incidence of preforeclosure sales, time period to reestablish credit is two years.
• If current residence is pending sale but will not close prior to new transaction, both the current and proposed mortgage payments must be used to qualify the borrower for the new transaction. 
• If current residence is being converted to an investment property, the lender will count 75% of the rental income if there is documented equity of at least 30% in the existing property.  The lender will also require six months reserves for both properties.

What if you’re already facing foreclosure?  How does the bill help you?

The Federal Housing Administration will be authorized to insure up to $300 billion in refinanced mortgages to help borrowers at risk of losing their homes trade unaffordable loans for fixed-rate mortgages backed by the government.  To participate, lenders must agreeto accept roughly 85% of each home’s current value as payment.  Borrowers could then apply for a new loan for up to 90% of the homes value, but must prove their ability to pay the new loan, and py the government a 1.5 % annual insurance fee, as well as a portion of any profits from resale.  When I was listening to talk radio discuss this topic last week, they were saying that roughly 300 thousand homeowners would be helped and people were skeptical because the lenders must agree to do this.

TAX BENEFITS for first time home buyers?  At first I liked the sound of this, then I read a little bit further. On the surface it looks like first time home buyers who purchase a home from April 9, 2008 to July 1, 2009 will be eligible for a tax credit of up to $7,500!  That sounds great right!  Tax credit = free money?? WRONG - read further and its a credit thats to be repaid over 15 years!  YIkes, what kind of great credit is that?  I’m skeptical….

DISCLOSURES - the good news is that this bill is calling for more disclosure and more explination of the terms in mortgage contracts, particularly with the variable-rate mortgages.  This is good news, but will the average consumer really listen??

What are your thoughts?  Do you approve or disapprove of the policy?

Yes there really was such a thing!  I’m so happy to have been in attendance for this event, which was held last Thursday.  If you’re a blogger and you weren’t able to attend this first one, don’t worry there will be a 2nd.  Look for it bigger and better next year.

It was fun to meet the writers and put faces to the words I read on an almost daily basis.  Having been blogging for less than a year, I feel recharged to continue my quest of blogging my random real estate musings.

Thanks to our gracious hosts at The Mercantile Library (located at 414 Walnut Street). This place is absolutely amazing! If you haven’t been yet, you need to go.  Its a real hidden gem of our great city.

We were just sent out a list of all those bloggers who were in attendance.  Enjoy!

5CHW4R7Z (http://www.5chw4r7z.blogspot.com/)

Bad Pitch Blog (http://badpitch.blogspot.com/)

Building Cincinnati (http://www.building-cincinnati.com/)

Buy Cincy (http://buycincy.com/)

CETconnect (http://cetconnect.blogspot.com/)

Cincinnati Area Commercial Real Estate Trends (http://cincicommercialrealestate.blogspot.com/)

Cincinnati Blog (http://www.cincinnati.blogspot.com/)

Cincinnati Dealer (http://www.cincinnatidealer.com/)

Cincinnati Locavore (http://cincinnatilocavore.blogspot.com/)

Clark Street Blog (http://clarkstreetblog.blogspot.com/)

Die Fladermaus (http://mattvant.blogspot.com/)

ENCORE (http://encorecincinnati.wordpress.com/)

Girlfriendology (http://girlfriendology.com/)

Gonz O’Lager (http://gonzolager.blogspot.com/)

Hello, Gerard (http://hellogerard.blogspot.com/)

Joe Wessels (http://joewessels.net/)

Juliet & Juliette (http://julietandjulietteblog.com/)

Kate’s Random Musings (http://www.katesrandommusings.com/)

Keeping it REAL Estate (http://livingcincinnati.com/)

Kelly the the Max! (http://kellyhudson.blogspot.com/)

Live Green Cincinnati (http://www.livegreencincinnati.com/)

Liz Wu Music (http://www.cincychic.com/component/option,com_mamblog/task,show/action,user/id,808)

Make Cincinnati Weird (http://www.makecincinnatiweird.com/)

Mommy Bits (http://www.MommyBits.blogspot.com)

Cincinnati Women Bloggers (http://www.CincinnatiWomenBloggers.blogspot.com)

My Wine Education (http://www.wine-girl.net/)

Not Really a Book Blog Blog (http://nrabb2.blogspot.com/)

Permasmirk (http://permasmirk.com/)

Prospective (http://prosepective.blogspot.com/)

Queen City Survey (http://queencitysurvey.blogspot.com/)

Queer Cincinnati (http://cincywestsidequeer.blogspot.com/)

Soapbox (http://www.soapboxmedia.com/)

Strategic Public Relations (http://prblog.typepad.com/strategic_public_relation/)

The Journey is the Reward (http://blog.morristsai.com/)

Turning the Page (http://www2.cincinnatilibrary.org/blog/)

Urbanophile (http://theurbanophile.blogspot.com/)

Wine Me Dine Me (in Cincinnati) (http://winemedinemecinci.blogspot.com/)

I read an interesting article in a back issue of the New York Times.  Its about buyers and sellers writing each other letters to try and justify why their making the offer they’re making.  I have often seen & heard of buyers writing letters to sellers letting them know how much they love the sellers house in hopes of getting an accepted offer.  I’ve even had a few of my buyers do this in the case of multiple offers where we know we are coming in lower than the other (using this to maybe tip the scales in our favor).  Does it work?  Maybe.  I’m a sucker for emotion so if it came to a letter vs. no letter then I’d probably choose the letter.  My husband just laughs, that stuff would never work on him.

The NY Times article mentions a “new” kind of buyer/seller letter.  This one justifying why the offer is so low and even a sellers rebuttal.  Yes, even though the majority of Cincinnati real estate has adjusted their prices for today’s market, there are some sellers who still haven’t come to terms with where the market is and therefore there are some offers that buyers make that are much lower than the asking price.  I’ve actually had buyers do this as well.  We’ve put in letters indicating all of the work that needs to be done and therefore we couldn’t possibly pay the asking price.  However, I’ve never have I had a seller respond to my letters sent.

So, I’m curious, would an “emotionally charged” letter work for you?  Or would you just scoff at it?

Picture yourself as a home seller. You’ve endured the first stages of preparing your home for market, you’ve scrubbed, decluttered, painted, staged, etc.  Next you’ve put up with the showings, the agony of packing up the pets, kids and enduring countless hours away from your house while total strangers opened your cabinets, critiqued your furniture and ultimately decided that they don’t like your house as much as you do.  It can be a very stressful time for sellers.

THEN, you get that much anticipated “second showing.”  You get excited, but try not to be too excited about the possibility that this buyer could be the one!  Then waiting with baited breath, you get that phone call from your agent “I’ve got an offer coming in!”  Your heart skips a beat, maybe you can buy that house you just saw online after all.  You start planing your move, where your kids will go to school, what color to paint the family room, what flowers you’re going to plant in the back yard and then your jerked back to reality when you realize that you don’t even know the details about the offer coming in.  What if its not enough money to get you where you’re going?  What if they can’t close until 60 or even 90 days later?  What if the house doesn’t appraise?  What if their financing falls through?  What if they change their minds? 

This is just a little bit of what goes through sellers minds when they get an offer to purchase their home.  Unless you’ve bought and sold real estate multiple times, it can be a very nerve racking experience.  Most people will be involved with only a handful of real estate transactions in a life time.  While professional real estate agents will be involved with hundreds of transactions in their life time. 

Here are a few helpful hints I can give to sellers faced with a purchase contract:

1. Don’t expect too much.  After all, when you go to purchase are you going to make it as easy as you can on the sellers?  Of course not!  You’re going to try to get the house as cheaply as you can and negotiate the best terms you can.  You’ve got to realize that that’s what buyers are doing to you!

2. ALWAYS COUNTER OFFER.  In this market many sellers are faced with “low ball” offers.  Some buyers out there still think that every seller is 20% over priced and they are all desperate to sell.  This is not the case in the Cincinnati Real Estate Market.  Sure buyers have more bargaining power because there are more of them out there.  Its a buyers market.  But most of the real estate in my area has already adjusted their prices for current market conditions. 

3.  Have your agent run comparables of recent solds in the area.  If there are recent comps that show the buyers offer is good, work with it.  Know that even if you think you’re taking a hit on the selling side, if you’re buying you’ll make it back (especially if you’re buying up).  You also need to realize that your house will need to appraise.  Appraisers look at the same thing we do when it comes to pricing your house.  If your agent can’t find a recent sold to justify the price you want, then chances are the appraiser won’t either.

4.  Don’t count your blessings until you get through the inspection contingency.  This is where many deals are lost.  Its amazing to me how many people are willing to let deals fall through over small things in inspections.

5. Take the emotion out of it.  A lot of times when sellers are faced with an offer lower than they expected, they get offended and start taking things personally.  Remember when you put your house up on the market, it is no longer your home.  It is something that is going to be sold to someone else.  Its essentially not yours anymore.

Of course you can’t prepare for every home selling situation.  There are so many variables that it would be impossible.  But if you take some of this to heart and really listen to the agent that you have, chances are you’ll move into that new house before you know it!

16. Cincinnati, Ohio (tie)

Forbes.com had an interesting article out today about the best and worst cities to rent a home.  Cincinnati was ranked #16 out of 40 and it was a tie (both worst and best).  This being because the average rent is only a bit cheaper than the average mortgage ($668 and $712 a month, respectively).  The annual change in rent from 2007 is at 2.7% and there is 100% increase in new construction, which they say means more apartments are set to open up.

So what are the advantages/disadvantages of renting and not buying?  Obviously, if you don’t know how long you’re going to stay put in Cincinnati, renting is your best option.  Real estate is a long term investment and you should be ready for it. Renting also means that when something breaks in the house, you don’t have to fix it.  Your landlord does. Therefore, in theory, you should be saving more money. Reversly, that means if you own your home you’re the only one responsible for maintaining the property and you should be saving up for those “rainy day surprises.” 

One big disadvantage to renting is that you’re not investing your monthly payments into something that will most likely bring you a return.  When I go to sell my house and move, I will most likely be getting some cash back at closing so I can put more money down on my next property.  If you’re renting, all of your money goes into your landlords investment.  He reaps the benefits, you don’t. 

Another thing that Forbes mentioned that I thought was interesting was that children of the baby boomers “Millenials,” aren’t earning enough to buy up existing inventory and that they’re still being paid entry-level salaries.  With wages remaining low, it could be very difficult for first time home buyers to save up enough to purchase.  However, I’m seeing the opposite happen in my business.  It is the first time home buyers who are realizing that now is the time to purchase their first home.  The best thing I ever did was buy my first home years ago and have roommates pay my mortgage for me!  This is something that I often encourage people just out of college to do.  If you can save up 3% for a down payment, find a nice inexpensive home and get some roommates, you’ve got it made!  You can live virtually for “free” and save up for if/when things go wrong with the home.

Like all real estate it is very local.  What is happening in one area of town, may not necessarily be happening in another.  You need someone out there to really help you make a wise decision regarding your purchase.  Even with an expert you’re never guaranteed to make money, but you’ve got a better chance of it!

Happy shopping and if I can be of some assistance, let me know!