The Senate on Wednesday approved a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.
The move by Senate Majority Leader Harry Reid would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The proposal, approved by a 60-37 vote, would only allow people who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline.
Reid, D-Nev., added the proposal to a bill extending jobless benefits through the end of November. Nevada has the nation's highest foreclosure rate, and Reid is facing a tough re-election campaign.
The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.
"If Congress fails to act promptly, then prospective homebuyers might not get the benefit of the homebuyer tax credit, even though they have completed contracts," the Realtors said a a letter to lawmakers.
First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
The $140 million cost of the measure would be financed by denying businesses the ability to deduct from their taxes punitive damages paid when losing lawsuits or judgments.
For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.
Showing posts with label first-time. Show all posts
Showing posts with label first-time. Show all posts
Wednesday, June 16, 2010
Wednesday, March 31, 2010
$18,000 in Combined Homebuyer Tax Credits
CALIFORNIA COMBINED HOMEBUYER TAX CREDITSAvailable for a Limited Time
Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.
Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010. Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied. The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)). California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)). Other terms and restrictions apply to both tax credits.
Thursday, December 17, 2009
Short-Sale standards could help troubled homeowners
Bravo! Standardizing the short sale process is a fantastic move…
What’s missing from this proposal is requiring that agents be qualified to work in the Short Sale arena. These transactions are much more problematic and time consuming then a standard sale and require an entirely new skill set.
There are agents, with short sale listing who probably shouldn’t have a real estate license and yet they are representing owners in dire straits, where time is of the essence and they (the agent) are all that stands between a successful short sale and foreclosure.
When one or the other is the only option, there’s a big difference. The credit score hit alone is at least a couple hundred points higher, foreclosure verses short sale and a foreclosure stays on your record for a minimum of 7 years verses just a couple with a short sale. There are other issues as well.
If you’ve followed the content I’ve posted recently, you’ll probably agree that we need to assure that more of this “pre-foreclosure” property is successfully marketed. Perhaps the holders of these second liens will need to decide between $3,000 guarantee and the prospect of pursuing more money, over time by legal means. We all know who end up with the lion share in that scenario.
In the end, if we can cut the number of foreclosures then it’s a win. The banks do not need more property and the short sale process needs to be less of a hassle with a higher rate of success. As someone focusing more and more on short sales, parameters and timeline are welcomed.
Obama's standardized short-sale plan could help troubled homeowners
The Los Angeles Times
By Kenneth R. Harney
December 13, 2009
Reporting from Washington - If you're in trouble on your mortgage and can't get a loan modification, check out the Obama administration's standardized short-sale plan that's scheduled to roll out in the next several months.
The program, outlined Dec. 1 by the Treasury Department, is an attempt to streamline what has traditionally been a contentious, time-consuming process by requiring lenders and others to use nationally uniform documents, timelines and financial incentives.
A short sale involves a lender or investor agreeing to collect less than the balance owed on a mortgage debt out of the proceeds of a negotiated sale of the property. Often a short sale is the last alternative to foreclosure available to distressed homeowners and banks. Say you've lost your job and fallen behind on mortgage payments. With little or no income, you can't qualify for a modification program.
In this situation -- grim as it is -- your best move may be to see whether your lender will accept a short sale. Though the idea sounds straightforward, in practice it is not. First, the bank needs to be convinced that a short sale would yield it more money at the bottom line than a foreclosure would.
This usually means you need to bring in a real estate agent who knows the ropes and can pull together the key information needed by the bank: recent comparables on closed sales, local market trends and the likely selling price of your house.
You'll also need a buyer for the house -- one who'll pay a price acceptable to the bank and has financing to close the deal. If you happen to have a second mortgage or home equity credit line on the property, you'll also need to negotiate how much that lender will receive from the sale proceeds.
That can be tricky. In depressed real estate markets, the second-lien lender may be holding a note that's worthless in a foreclosure because plummeting property values have wiped out the collateral. Yet that same bank is in a pivotal position: It has the legal power to block the short sale by refusing to sign on to the deal.
Equally troublesome in short sales is the fact that banks, mortgage servicers and bond investors often have conflicting requirements for documentation and financial yields that can complicate and drag out the haggling for months.
Enter the Obama administration's new streamlining plan. Besides requiring lenders and servicers to use uniform documentation, pre-approved short-sale terms and accelerated turnaround times, the plan provides financial incentives for key players:
* Homeowners who successfully complete a short sale under the program receive $1,500 to defray relocation costs.
* Mortgage servicers can receive $1,000 per case.
* Investors get $1,000.
* Second-lien holders receive up to $3,000 from the sale proceeds.
Even real estate agents get something: The rules prohibit banks from forcing them to cut their commissions from the listing agreement as part of the final deal.
Sounds like a formula for encouraging a lot more short sales, right? The jury will be out on that for months, and most major lenders are still studying the fine print of the Obama program. But early reactions from big banks appear to be positive.
Dave Sunlin, a senior vice president for Bank of America Corp., said: "We're very pleased. We welcome any effort to reach standardization for all parties" involved in short sales.
Faith Schwartz, executive director of Hope Now -- a Washington-based group representing the country's largest banks, mortgage servicers, bond investors and consumer counseling organizations -- said the plan should bring "uniformity and standards" to a process usually characterized by "mayhem" among the negotiating parties.
Scott Brinkley, a senior vice president for First American Corp., a firm that provides market data for banks, said, "You're going to see a lot of cooperation" by lenders and investors.
But there could be a major pothole: The Obama plan tilts to consumers by requiring second-lien holders to drop all financial claims against short-selling borrowers beyond the $3,000 they take out of the deal.
Travis Hamel Olsen, chief operating officer of Loan Resolution Corp., a Scottsdale, Ariz., consulting firm, says the $3,000 payment won't be enough for many second-mortgage lenders. Today they frequently obtain additional short-sale compensation from sellers as the price of their participation -- in cash or through promissory notes -- far beyond $3,000.
"I'm concerned that that could limit participation" by second-lien holders, Olsen said.
Bottom line for homeowners who might benefit: Don't have wild expectations, but definitely ask your servicer whether it plans to participate and whether the forthcoming standardized plan for short sales might work for you.
Source: Los Angeles Times
What’s missing from this proposal is requiring that agents be qualified to work in the Short Sale arena. These transactions are much more problematic and time consuming then a standard sale and require an entirely new skill set.
There are agents, with short sale listing who probably shouldn’t have a real estate license and yet they are representing owners in dire straits, where time is of the essence and they (the agent) are all that stands between a successful short sale and foreclosure.
When one or the other is the only option, there’s a big difference. The credit score hit alone is at least a couple hundred points higher, foreclosure verses short sale and a foreclosure stays on your record for a minimum of 7 years verses just a couple with a short sale. There are other issues as well.
If you’ve followed the content I’ve posted recently, you’ll probably agree that we need to assure that more of this “pre-foreclosure” property is successfully marketed. Perhaps the holders of these second liens will need to decide between $3,000 guarantee and the prospect of pursuing more money, over time by legal means. We all know who end up with the lion share in that scenario.
In the end, if we can cut the number of foreclosures then it’s a win. The banks do not need more property and the short sale process needs to be less of a hassle with a higher rate of success. As someone focusing more and more on short sales, parameters and timeline are welcomed.
Obama's standardized short-sale plan could help troubled homeowners
The Los Angeles Times
By Kenneth R. Harney
December 13, 2009
Reporting from Washington - If you're in trouble on your mortgage and can't get a loan modification, check out the Obama administration's standardized short-sale plan that's scheduled to roll out in the next several months.
The program, outlined Dec. 1 by the Treasury Department, is an attempt to streamline what has traditionally been a contentious, time-consuming process by requiring lenders and others to use nationally uniform documents, timelines and financial incentives.
A short sale involves a lender or investor agreeing to collect less than the balance owed on a mortgage debt out of the proceeds of a negotiated sale of the property. Often a short sale is the last alternative to foreclosure available to distressed homeowners and banks. Say you've lost your job and fallen behind on mortgage payments. With little or no income, you can't qualify for a modification program.
In this situation -- grim as it is -- your best move may be to see whether your lender will accept a short sale. Though the idea sounds straightforward, in practice it is not. First, the bank needs to be convinced that a short sale would yield it more money at the bottom line than a foreclosure would.
This usually means you need to bring in a real estate agent who knows the ropes and can pull together the key information needed by the bank: recent comparables on closed sales, local market trends and the likely selling price of your house.
You'll also need a buyer for the house -- one who'll pay a price acceptable to the bank and has financing to close the deal. If you happen to have a second mortgage or home equity credit line on the property, you'll also need to negotiate how much that lender will receive from the sale proceeds.
That can be tricky. In depressed real estate markets, the second-lien lender may be holding a note that's worthless in a foreclosure because plummeting property values have wiped out the collateral. Yet that same bank is in a pivotal position: It has the legal power to block the short sale by refusing to sign on to the deal.
Equally troublesome in short sales is the fact that banks, mortgage servicers and bond investors often have conflicting requirements for documentation and financial yields that can complicate and drag out the haggling for months.
Enter the Obama administration's new streamlining plan. Besides requiring lenders and servicers to use uniform documentation, pre-approved short-sale terms and accelerated turnaround times, the plan provides financial incentives for key players:
* Homeowners who successfully complete a short sale under the program receive $1,500 to defray relocation costs.
* Mortgage servicers can receive $1,000 per case.
* Investors get $1,000.
* Second-lien holders receive up to $3,000 from the sale proceeds.
Even real estate agents get something: The rules prohibit banks from forcing them to cut their commissions from the listing agreement as part of the final deal.
Sounds like a formula for encouraging a lot more short sales, right? The jury will be out on that for months, and most major lenders are still studying the fine print of the Obama program. But early reactions from big banks appear to be positive.
Dave Sunlin, a senior vice president for Bank of America Corp., said: "We're very pleased. We welcome any effort to reach standardization for all parties" involved in short sales.
Faith Schwartz, executive director of Hope Now -- a Washington-based group representing the country's largest banks, mortgage servicers, bond investors and consumer counseling organizations -- said the plan should bring "uniformity and standards" to a process usually characterized by "mayhem" among the negotiating parties.
Scott Brinkley, a senior vice president for First American Corp., a firm that provides market data for banks, said, "You're going to see a lot of cooperation" by lenders and investors.
But there could be a major pothole: The Obama plan tilts to consumers by requiring second-lien holders to drop all financial claims against short-selling borrowers beyond the $3,000 they take out of the deal.
Travis Hamel Olsen, chief operating officer of Loan Resolution Corp., a Scottsdale, Ariz., consulting firm, says the $3,000 payment won't be enough for many second-mortgage lenders. Today they frequently obtain additional short-sale compensation from sellers as the price of their participation -- in cash or through promissory notes -- far beyond $3,000.
"I'm concerned that that could limit participation" by second-lien holders, Olsen said.
Bottom line for homeowners who might benefit: Don't have wild expectations, but definitely ask your servicer whether it plans to participate and whether the forthcoming standardized plan for short sales might work for you.
Source: Los Angeles Times
Monday, November 23, 2009
October home sales rise 10.1% from September
Obviously this is based on National sales and South Bay in general; the beach cities, Palos Verdes Peninsula and surrounding communities are affected to varying degrees as well, however we are somewhat different when compared to the country as a whole. For instance median home value in Torrance alone is $492k, more than twice the national average. You can nearly double that again for Rancho Palos Verdes. There are currently 24 financially “distressed” properties (Short Sale, REO, NOD) listed on the MLS on the Palos Verdes Peninsula and 102 in the western extreme of the area from El Segundo south to the peninsula. RD
October home sales rise 10.1% from September
From the Associated Press
November 23, 2009 7:40 a.m.
WASHINGTON -- Home sales far exceeded expectations last month, surging to the highest level in 21/2 years as first-time buyers rushed to take advantage of an expiring tax credit.
The National Association of Realtors said today that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.
The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.
The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline, said Lawrence Yun, the trade group's chief economist.
But sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline.
The new deadline means that "we're going to see some good activity coming out of the spring," said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.
Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.
The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.
In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.
The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.
Nationwide sales are up nearly 37 percent from their bottom in January, but are still off about 16 percent from the peak in autumn 2005.
Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.
But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.
A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.
Source: The Los Angeles Times
October home sales rise 10.1% from September
From the Associated Press
November 23, 2009 7:40 a.m.
WASHINGTON -- Home sales far exceeded expectations last month, surging to the highest level in 21/2 years as first-time buyers rushed to take advantage of an expiring tax credit.
The National Association of Realtors said today that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.
The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.
The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline, said Lawrence Yun, the trade group's chief economist.
But sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline.
The new deadline means that "we're going to see some good activity coming out of the spring," said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.
Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.
The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.
In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.
The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.
Nationwide sales are up nearly 37 percent from their bottom in January, but are still off about 16 percent from the peak in autumn 2005.
Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.
But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.
A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.
Source: The Los Angeles Times
Friday, November 6, 2009
Federal Homebuyers Tax Credit EXTEDNDED!
TAX CREDIT OVERVIEW
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer's situation, a credit would not be due:
• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from "step-relatives.")
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.(This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
Source: Andre Hemmersbach, Mortgage Planner at American/California Financial Services, Inc. (310) 792-7539
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer's situation, a credit would not be due:
• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from "step-relatives.")
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.(This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
Source: Andre Hemmersbach, Mortgage Planner at American/California Financial Services, Inc. (310) 792-7539
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