$8,000 Tax Credit

NEW YORK (CNNMoney.com) — There’s a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama’s signature on Tuesday. First-time buyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns – was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:

“I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?”

The short answer? Yes, Billings would get back the $8,000 plus what he’d overpaid. The long answer? It depends. Here are three scenarios:

Scenario 1: Your final tax liability is normally $6,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid Uncle Sam $6,000. Since you’ve already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you’ve overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you’ve underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy – or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate’s proposal of a $15,000 non-refundable credit for all homebuyers.

“[The Senate version] would have done a lot more to turn around the housing market,” said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). “We have a lot of reports of people who would be coming off the fence because of it.”

Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.

The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. “I think there are many homeowners who would be trading-up but they have had no buyers for their own homes,” Yun said.

Who won’t benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle – they still have to close the sale before claiming the bonus.

One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB’s Dietz.

Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.

And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home – a lawnmower, a rug, a sofa – and, in that way, help stimulate the economy.

Origional story found here

Rental Reductions in Manhattan

Like many hedge funds, Amber Capital spent lavishly when times were flush, pouring $8 million into its new offices on the 57th floor at 601 Lexington Avenue, the angled tower at 53rd Street known as the Citigroup Center until this year. The money bought Amber custom cabinetry with luxurious finishes and the latest in communications, ventilation and acoustical systems.

Last year, when the company’s fortunes waned, Amber put its offices on the sublease market. But prospective tenants balked at subletting space from a company with an uncertain future. If the business went under, Amber would be legally entitled to cancel the lease and the subtenant’s claim to the space could be jeopardized, resulting in a costly disruption.

Recently, a new tenant, a Brazilian company called BTG Investments, agreed to take Amber’s space. But instead of becoming a subtenant, BTG signed a lease for eight and a half years directly with the landlord, Boston Properties.

Though Manhattan office rents continued to fall in the second quarter of the year, some signs of life have emerged in the last few weeks. “The paralysis has been shaken off,” said Cynthia Wasserberger, a managing director at Jones Lang LaSalle, the national brokerage firm.

In June, for example, about 1.5 million square feet were leased, up significantly from the 980,000 square feet leased in May, according to another brokerage firm, CB Richard Ellis.

But more than ever, tenants are going to great lengths to protect themselves while taking advantage of good deals.

“There was not even a chance we were going to do a sublease with Amber,” said BTG’s broker, Brian G. Goldman, an executive managing director at Newmark Knight Frank.

Mr. Goldman would not discuss the terms of the deal, but other real estate professionals said that BTG not only got the benefit of a fashionable turnkey office, but it also negotiated a starting annual rent of $78 a square foot, with nine months of free rent — a much better deal than Amber had at $110 a foot. Amber is also said to have paid the landlord an undisclosed sum to tear up its lease. Neither Boston Properties nor Amber would comment.

Many landlords who bought or refinanced their properties at the height of the market are facing challenges in the next couple of years, so tenants are seeking legal assurances that they will not have to move if a building changes hands. And some are getting landlords to set up escrow accounts to make sure that refurbishing commitments are fulfilled, brokers say.

Despite a slight increase in new and renewed leases in the quarter that ended June 30, the proportion of space that is vacant now or will become available within a year increased to 13.1 percent, from 11.8 percent on March 31, according to Studley, a brokerage firm that represents tenants. Nearly one-third of the available space is for sublet.

For prime buildings in Midtown, the availability rate is 15.1 percent, the highest it has been since the early 1990s.

Even so, the average annual asking rent of $53.76 a square foot for Manhattan office space as a whole — 22.4 percent lower than it was a year ago — is still 50 percent higher than it was when the last real estate downturn was ending, in 2003, said Steven Coutts, who directs Studley’s national research services. “That tells me there’s definitely some way to go,” he said.

Until the last few weeks, so few leasing transactions had occurred that it was impossible to establish a reliable indication of where rents actually stood, said Ben Friedland, a senior vice president at CB Richard Ellis. The spread between what landlords were asking and what they were accepting seemed to depend on the individual deal. “Now the gap between the asking price and the taking rent is beginning to stabilize,” Mr. Friedland said.

Earlier this year, tenants and landlords were buying time, signing short-term renewals rather than standard leases, brokers and landlords say. Regardless of whether rents have reached their low point, there are strong signs that tenants are taking advantage of their bargaining power and are more willing to make long-term commitments.

“They have better clarity as to where their businesses are going,” said Steven M. Durels, director of leasing for SL Green, Manhattan’s largest office landlord. “Landlords have gotten more realistic, and tenants have realized a major price correction.”

Only a handful of the deals that closed in the last quarter involved office space of 100,000 square feet or more, and all were renewals. The Bonnier Corporation, a magazine publisher, is subletting 100,700 square feet previously occupied by the Tribune Company at 2 Park Avenue, at 33rd Street, but recently signed a direct lease with the landlord, L & L Holding. “It’s pretty consistent with what you’re seeing — where a tenant can stay in place and not have the expense of moving,” said David W. Levinson, the chief executive of L & L.

Mr. Levinson said Showtime Networks had wanted to move to an L & L property, 200 Fifth Avenue, the former International Toy Center, but decided to hang on to its 144,000 square feet at 1633 Broadway, at 50th Street, because it would have cost too much to move.

But some smaller and medium-size tenants need to move for the sake of their business. Marcum, an accounting firm with 200 employees in Manhattan, had outgrown its current Midtown offices and was on the verge of leasing larger quarters last September at 733 Third Avenue, at 45th Street, for an annual rent of $65 a square foot. Then, Lehman Brothers collapsed.

“We decided to wait a couple of months to see what would happen in the market,” said Jeffrey M. Weiner, a managing partner. In May, Marcum leased two floors at 750 Third Avenue for $50 a foot, a considerable saving, Mr. Weiner said. The company also got SL Green to agree to build its new offices.

Another tenant that has apparently worked the market to its advantage is Direct Access Partners, a small trading firm that is seeking to expand its offices while maintaining its proximity to the New York Stock Exchange and, if possible, its Wall Street address. Its current offices at 14 Wall Street have become so cramped that the company has installed work stations in the conference room, said the chairman, James B. Craig.

Mr. Craig has had his eye on 40 Wall for the last year, but said he would have spent 35 percent more had he signed a lease right away. He has yet to make a decision. “The longer I look, the cheaper the prices keep getting,” he said.

Mr. Craig’s broker, Ruth Colp-Haber, a partner at Wharton Property Advisors, said landlords were willing to provide as much as a year’s free rent and invest $80 a square foot to create new offices. “For these niche players in the financial arena, there are tremendous opportunities,” she said.

Some tenants are grabbing the chance to move to more prestigious locations. Tenants who were priced out of Midtown are finding that this is no longer the case, Ms. Wasserberger said.

Her client, InnerWorkings, a print and promotional material management company, had offices scattered among three locations in Midtown. But it wanted to consolidate its space, save some money and create an office of the same caliber as its headquarters in Chicago.

A month ago, InnerWorkings signed a lease for the 22nd floor at 1440 Broadway, at 40th Street. “We were able to accomplish our strategic goal and get everyone under the same roof,” said David Freundlich, a managing director. “And we were able to take advantage of market conditions to trade up.”

Origional story can be found here