Instead of expiring at the end of November, the First Time Homebuyer Credit has been extended to the purchase of homes that are under contract by April 30 and closed by June 30, 2010.
This is an extension of the $8,000 credit offered to home buyers who have not owned a home within the previous 3 years. This definition of “First Time Homebuyer” has confused some who don’t realize that they do qualify, even though they have owned a home in the past.
The difference between the current credit and the 2009 credit is the income limit. Last year’s limit was $75,000 for a single person and $150,000 for a married couple. The new limits are $125,000 and $225,000. Buyers with additional income of up to $20,000 more are eligible at a decreasing percentage based on income.
Congress also passed an expansion to this bill – now including homebuyers who have lived in their present home for at least 5 of the past 8 years. This $6,500 credit is the subject of debate among real estate professionals. Some believe it will spur the market while others see it as having no effect.
As with the original $8,000 First Time Buyer Credit, some real estate professionals believe it will cause sellers to remain firm on pricing. Some feel they don’t need to negotiate because the buyers are going to get the credit. That belief, however, can come back to haunt them as buyers move on to homes with more favorable pricing.
For homebuyers who want to “move up,” the $6,500 tax credit may ease the sting of taking a loss on the home they are selling. This adds to the fact that the savings on their new home can outweigh the loss on their previous home.
In a market where prices are down 20%, their loss on a $100,000 home is $20,000 while their savings on a $200,000 home is $40,000.
Agents working in high-end markets, with homes in the $500,000 and up range, are those who saw little effect from the previous credits – and who don’t expect to see an impact from these. For many of those agents, the biggest motivating factor is “bargain pricing.”
In some markets, homes that had been offered at over $1 million can now be purchased for as little as $750,000. For consumers wishing to own a second home on the beach or a chalet at a ski lodge, that savings can be a powerful motivator to act now.
Author: Mike Clover
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