California First Time Home Buyer Tax Credit--First Come First Serve

The Federal tax credit is gone. However, California enacted a new first time (FTB) and "Brand New" Home Buyer Tax credit 5 percent of the purchase price or a maximum of $10,000 that began on May 1, 2010 that requires you to act now because the credit will only be available on a first come first serve basis. $100 million was allocated to FTB's and $100 million was allocated for buyers of New, never lived in, home buyers.

While these credit are available for taxpayers who purchase a qualified principal residence until the end of the year, the California Association Realtors® expects "the money will be used up very quickly".

Besides the limited funds, another issue that has come to light is the refunds are divided over 3 years and applied towards what the home buyers owe in state taxes. So many taxpayers may not be able to utilize the entire credit, if they don't owe as much as the credit. Taxpayers should consult their tax accountants to see how to take full advantage of the tax credit.

Please see the State of California Franchise Tax Board website for more detailed information.

So if are wondering if now is the time to buy a home and take advantage of the tax credit. Now is definitely the time, before the money runs out.

--Virginia Hall
ABR, CRS, e-Pro, GRI, SFR
Coldwell Banker Residential Brokerage
Direct (619)258-8585

Uncle Sam's Christmas Gift

While everyone is bustling around buying gifts and attending parties, there are still serious buyers out there making multiple offers on well maintained homes.

If you atticipate the need to sell your home, now is a great time to market it. The number of homes for sale are typically lower at this time of year due the holidays. With fewer serious buyers trampling through your home and the Christmas decorations adding a romantic ambience, make it the perfect time to sell.

If you need to sell, it definitely won't get sold unless you have it on the market. Worried about theft? Hiring a Realtor who uses computerized Sentri lockboxes, provides the ability to track agents and their clients entering the home.

Many sellers think waiting until spring is the best time to sell. However this year, with the Tax credit extension, buyers must have an accepted offer by April 30, 2010 and close by June 30,2010 leaving only a few more months. So if you are facing a possible foreclosure and want to sell your home before that, you need to consider that banks typically take several months to approve short pay sales.

If you are moving up, you may qualify for the $6500 tax credit. The tax credit does have income limits and the home-price cannot be above $800,000. Read more about it in Homebuyer Tax Credit Extension & Expansion . However, if you can afford to move up, this is the perfect time to sell and buy a bigger or better home.

Many move-up home buyers say they are waiting for home prices to go back up to regain the equity that they have lost in the last couple of years. For those who have lost all of their equity, there is no choice. They must wait for the equity to return. However, for those who have some equity and plan to wait until they regain what they have lost, may find themselves behind the curve.

Several years from now when home prices begin to rise again, as they historically do in San Diego County, the home equity growth will all be in proportion to the price of the home. For example, if you purchase a home of $350,000 versus a home of $700,000, in 10 years from now if the home value rises 10% then you will have gained $70,000 in the $700,000 versus $35,000 in the $350,000 home. During the downturn, if you have lost about 30% of your home equity, on your $350,000 house, then you will be down about $150,000 in equity. In comparison, the $700,000 house has lost about $300,000 in equity, twice as much. So in the long run when home prices go back up as they historically do, by moving up now, then you will be up $150,000 in equity.

Don't delay take advantage of Uncle Sam's Christmas Gift.

Homebuyer Tax Credit Extension & Expansion

If you haven't heard the news already, the First Time Home Buyer Tax Credit has been extended, as well as the new bill includes a tax incentive for existing homeowners as well. Homeowners who have owned their current homes at least five years, are now eligible for tax credits of up to $6,500 when they purchase a new home. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010 and close by June 30.

The credit is available for the purchase of principal homes costing $800,000 or less, excluding vacation homes. Single individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000 would not be eligible.

Other provisions in the bill, include taxpayers will be eligible to claim the credit on purchases made in 2010 on their 2009 income tax returns. The bill also established that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

While some may feel the tax credit may be adding to the National debt, according to the National Association of Realtors, economists estimate that the current tax credit has already contributed approximately $22 billion to the general economy, and approximately 2 million people will take advantage of the tax credit this year.

Some think that they didn't need to give such large tax credits. Or was it large enough? What do you think?

If you would like more information, please contact me.

Virginia Hall
ABR®, CRS®, e-Pro®, GRI®
Coldwell Banker Residential Brokerage
Direct (619)258-8585
DRE#01409760

Uncle Sam Giving Money Away to First-Time Homebuyers

What a great opportunity for the first time homebuyer! If you have been considering buying a home, but have been waiting for the opportune time...well it has arrived. As part of the American Recovery and Reinvestment Act of 2009, the Federal government has enacted the Homebuyer Tax Credit providing an $8,000 tax credit to first-time home buyers (or buyers who have not owned a private residence in the past three years) who purchase a home that they will live in on or after January 1, 2009 and on or before November 30, 2009. Unlike the previous 2008 tax credit, this credit does not require repayment and will be used to reduce the purchaser’s income taxes. If any of the credit remains unused, it will be refunded.

The National Association of REALTORS recently came out with the details:

How does it works?
• The Tax credit has been raised from $7,500 to $8,000 or 10% of purchase price (whichever is less).
• The credit does not require repayment.
• First time home buyers or buyers who have not owned a home in the last 3 years.
• To qualify, a single person must make less than $75,000 a year in income.
• Joint ownership must make less than $150,000 a year in income to qualify.
• Qualified buyers must purchase home on or after January 1, 2009 and no later than November 30, 2009.
• The property must be the primary residence.
• Purchaser must remain in home for 3 years or the credit will be recaptured at the sale of home.

Are there restrictions for the home I want to purchase?
• The primary residence can be a condo, single family detached, co-op, townhouse or something similar
• The home must be located in the United States.
• Vacation homes and rental properties are not eligible.
• For new construction, the “purchase date” is the date you occupy the home. So the move in date must be before December 1, 2009.

Who is not eligible for the credit?
• If your income exceeds the phase-out range. This means joint filers with Modified Adjusted Gross Income (MAGI) of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
• You may not buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• Vacation homes and rental properties are not eligible
• If you stop using your home as your main home.
• If you sell your home before the end of three years.
• If you are a nonresident alien you are not eligible

Recapture-3 Year Residency
• If the home is sold prior to three years of ownership, the tax credit must be repaid at closing.
• This provision is designed to prevent flipping homes in order to get the credit.

Other Provisions
• Purchasers who utilize state/local revenue bond financing can now use the credit.
• Purchasers who bought before January 1, 2009 and received the previous $7,500 tax credit are still subject to the terms of that repayable credit.

When Can I Claim the Credit?
• It can be claimed on your 2008 Tax Return (to be filed by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return.

So don't let this great opportunity pass you by...Buy!

Virginia Hall

2009 Brings New Hope!

While no one can predict the future, as President Obama sets up new legislation to turn around the economy, there is a new attitude emerging. One of hope.

Many attribute the recession to cycles and some see it as a self fulfilling prophecy. A year ago when the experts predicted a bad year, we all tightened our belts and trimmed the fat from our budgets. When you multiply this by the millions, you naturally have a recession.

But now a different climate is developing. Many see the Bailout money coming. We are ready to recover. “The economy, including the real estate market, may have finally arrived at, or is just before or just past the bottom,” according to Gary London in the San Diego Business Journal.

The recession has brought hope to many renters. The Housing prices have now rolled back to an affordable level, where renting costs as much as to own.

While First Time Home Buyers must have more money to put down than two years ago, there are still great benefits to buying a home. You have to have a place to live and in the long run, home prices continue to climb. Even with the recession, home prices are still triple what they were twenty years ago. Why pay someone else’s mortgage? The average home owner saves approximately $8000 a year in taxes. Not to mention the $7500 tax First-Time Home Buyer Credit incentive if you buy before July1st 2009. See http://www.federalhousingtaxcredit.com/ for more detail.

When I look back at when I was in my mid-twenties, at that time you couldn’t buy a house without having 20 percent down and the interest rates were in the teens. Unlike today when you can get into a home with as little as 3% down and the interest rates still continue to be in the 5 and 6’s.

While price reductions may continue during 2009, until the majority of foreclosures and short sales have been bought up, I agree with London “While it is very unlikely to be a banner year, 2009 will be a new beginning." Looking forward to a Better New Year.

--Virginia Hall