Kirk M West's Blog

Yes, it's true.  After all of the hype, media coverage, back and forth, Congress has extended the homebuyer tax credit.  It doesn't stop there.  They have also expanded the guidelines that will benefit previous or current homeowner's as well.  Keep in mind there are important deadlines to consider if you are planning on purchasing a new home.  Read below to get the real life time frames that you need to seriously consider.

First, for the complete breakdown of the extension and expanded guidelines, click here.

In addition, here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a firsttime homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you're within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is "consecutive." As long as he lived in that house for 5 years straight what he did since 3 years doesn't impact eligibility.

Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 or July 1, worst case), the purchaser will be eligible for the credit.

Now that you have read over all of the details and FAQs about the extended credit I want to addres with you realistic timelines. 

Our market is comprised mostly of short sales.  The short sale process can take anywhere fro 4 to 8 or 9 months.  With this in mind, get out there and get into contract as soon as possible. If you would like to get some assistance in writing a stronger offer for yourself or your clients, call me now at 916-893-9666.  There are actually quite a few things that can be done to make sure your offer is accepted.  Most agents may not know this either so have your agent or Realtor call me too.

If you plan on purchasing a foreclosed home or REO (real estate owned) property it can take about 60 days to complete the transaction.  It may sound like you have more time to look if that is the case.  However, REO homes are highet in demand simply because they do close quicker.  I have found that my clients have had to make offers on the same day or within a few days at the latest on new REO listing. 

Lets talk more about how you can position yourself for a more aggressive offer.