A Quick Understanding of the 1st Time Homebuyers $8,000 Tax Credit Extension & New Credit for Long-Time Homebuyers

On November 6, 2009, President Obama signed into law an extension of the $8,000 first-time homebuyers tax credit until April 30, 2010. Binding contracts for the purchase of a principal residence signed by April 30 must close by June 30 to qualify in order for the first-time homebuyer to qualify for the credit. For qualifying purchases in 2010, taxpayers will have the option of claiming the credit on either their 2009 or 2010 return.

The new law added several new provisions that apply to persons purchasing homes on or after November 7, 2009:

• Homebuyers with higher incomes can now qualify for the credit for homes purchased after November 6, 2009.
• Income limits have been increased to $125,000 for individuals and $225,000 for couples filing jointly. These income limits were formerly $75,000 and $150,000, respectively. The credit phases out for individual taxpayers with a modified adjusted gross income between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.
• The new law adds a $6,500 credit for long-time homeowners who want to trade up, that is, current home owners who have lived in their home for five of the past eight years and who buy a replacement principal residence by April 30, 2010.
• Qualifying home purchase prices must not exceed $800,000.
• The extended tax credit for first-time homebuyers remains at $8,000 and requires that the buyer have not owned a home in the past three years, as before.
• Purchasers claiming the credit will need to attach documentation of the transaction to their tax returns in order to help combat the tax credit fraud that has been experienced by the IRS to date.

Extended Homebuyer Tax Credit ResourcesFor additional information, the following resources – which can be expected to be updated frequently over the upcoming days and weeks – offer examples of fact situations, filing options and other details:
NAR The Basics: Extended Home Buyer Tax Credit 2009/2010: http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit
Internal Revenue Service: http://www.irs.gov/newsroom/article/0,,id=204671,00.html
NAR FAQ Regarding Tax Credit Changes: http://www.wra.org/pdf/government/2009_NAR_FAQ_TaxCreditChanges.pdf
NAR Comparison Chart: http://www.realtor.org/wps/wcm/connect
WRA Tax Credit Extension Video: http://wra.org/video/tax_credit_extension/tax_credit_extension.html

Preparing Your Home For Sale to Put Your Best Foot Foward

In preparing your home for sale, there are generally three areas of focus; de-clutter/clean, minor repairs/paint, and de-personalizing. A small investment of time and money in these three areas could make the diferrence in both the time on the market and the final selling price.

De-Cluttering/Clean:
Starting in either the basement or attic, pack-up all items through-out the home that are not needed on a daily basis, storing them in a neat manner in a section of the basement/attic. Think of this as preparing yourself for the move. This way when your house is sold you will already have a jump on the moving thing. If you do not have designated storage area, such as a basement ot attic, you may want to consider renting a storage area until your home is sold.

Also consider having a garage sale. No matter what time of year, there are plenty of garage sale customers. A summer time sale is typically held outdoors or in the garage. So where would you hold one in the winter? Indoors, maybe in the basement or wherever you have the most open space in your home. A winter garage sale can bring even more customers as there is no competition. After the sale, donate or discard un-purchased items.

Once you have de-cluttered, give your entire home a "deep" cleaning; counters, appliances, cabinets, bath fixtures, windows (glass & frame, inside & out), ceiling fans, floors and carpets.

Don't forget the outdoors. The drive-by is still as important as ever in selling your home. Make sure that these areas are also neat and tidy to give the right impression to the potential buyer. One that says that this house is ready for them to move into and enjoy knowing that "it has been well cared for".

Yes, the garage will also need to be tidied. Remember part of what you're selling is usable square footage..with the emphesis on usable.

Minor Repairs/Paint:
Attend to any minor repairs that are needed. Each repair in and of itself may not be a big deal but when added together they give the buyer the impression that there is going to be "a lot of work to do". If even had buyers go so far as to label a house a "fixer upper". It is not unusual for minor repairs to be a factor in turning away potential buyers or costing thousands in the final sale price.

In these days of HGTV and the DIY channel, it is especially important for your home to have a little "wow" factor and one of the easiest and inexpensive ways to get it is with paint. For example; paint one wall in a room a color 3-5 shades darker than the nuetral color of the rest of the walls.

De-personalizing:
Some real estate experts believe that it is important to remove ALL personal items - photos, etc. I'm not so sure. I think it is a balance. A photo of a treasured family moment can evoked strong feelings of "home" and after all this is one of the emotions that you're trying to evoke in a buyer. However, a home filled with photos on the walls, furniture and even kitchen appliances is too, too much!

Speaking of kitchen appliances, while your home is on the market avoid using them as bulletin boards. Again it is about balance, a drawing made by a child placed on the "frig" for display. But when combined with everything else, like teacher notes, doctor appointment slips, etc., etc. it is way too much and definately does not leave a positive impression.

There is no formula to guarentee the successful sale of your home but hopefully focusing in these three areas - de-clutter/clean, repair/paint, and de-personalize - will go a long way in getting it done.

NAR Frequently Asked Questions Homebuyers Tax Credit Changes

I wanted to share this information just in from the National Association of REALTORS® Government Affairs Division. Here are answers to 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 povision 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.