North County Properties

1st Time & Repeat Buyer #Tax Credit – How it Works

President Obama signed H.R. 3548 on Nov 6, enacting into law an extension, and adjustment, of the $8,000 tax credit for first-time buyers. Among other things, the extension adds money for certain move-up buyers; creates one deadline for signing a contract and a later deadline for closing; changes income requirements; and limits a purchased home’s cost to $800,000.

Florida residents enjoy two additional advantages. The Florida Homebuyer Opportunity Program (FHOP), created by the Florida Legislature earlier this year, still has approximately $28 million that first-time homebuyers can access and use toward their down payment. And move-up buyers have the ability to ‘port’ their current property tax savings to a new home.

First-time homebuyers

Most details for first-time homebuyers mirror the rules currently in existence. The maximum tax credit remains $8,000 ($4,000 for married individuals filing separately), and anyone who has not owned a home within three years is considered a “first-time buyer.”

• A purchase must be under contract by April 30, 2010.

• A purchase under contract by April 30 must close no later than June 30, 2010.

• After Dec. 1, 2009, income limits rise to $125,000 for singles and $225,000 for married couples; up from limits effective through Nov. 30 of $75,000 for singles and $150,000 for married couples. The tax credit phases out incrementally at each $20,000 increase in income.

• Effective immediately: The maximum home value purchased cannot exceed $800,000. Prior to the law being signed, first-time homebuyers had no limitation on a home’s cost.

Current homeowner tax credit

An existing homeowner who purchases a home may now claim a tax credit of up to $6,500. To qualify, that owner must have owned and used the same residence as a principal residence for any consecutive five-year period in the previous eight years.

• This new tax credit is effective immediately. Eligible homebuyers do not have to wait until Dec. 1 to close in order to qualify.

• Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.

Long-time Florida homeowners who enjoy discounted property taxes resulting from the state’s Save Our Homes amendment qualify for property tax portability

Florida Homebuyer Opportunity Program (FHOP)

Under FHOP, first-time Florida homebuyers can obtain interest-free bridge loans to access their federal tax credit before they complete a home purchase, enabling them to use that money upfront for down payment and closing costs. Once buyers submit their returns to the IRS and receive their tax credit money, they repay their loans to the state.

While funded by the state, the money is distributed through the city and county housing offices that operate the State Housing Initiatives Partnership (SHIP) program. There is no standardized program, and each local agency may operate under different rules for distribution. For more information, buyers should contact their local SHIP office.

To find a local SHIP office, go to: http://apps.floridahousing.org/StandAlone/FHFC_ECM/AppPage_SHIPLGContacts.aspx.

Additional changes

The tax credit extension includes other new rules, such as:

• The new law also impacts dependent purchases of homes, which weren’t addressed under the old rules.

• The new law requires a buyer to attach documentation about the home purchase to his or her income tax return. An audit found that some buyers are claiming the tax credit when they don’t deserve it, and investigators continue to seek out fraud. To minimize tax abuse going forward, buyers won’t receive the credit without submitting proof to the Internal Revenue Service (IRS).

The homebuyer tax credit is collected as part of the normal income tax process. As a credit, it’s calculated separately from an individual’s income tax, and paid regardless of taxes owed or withheld from income. As always, however, only a tax planner can render specific advice to anyone seeking the credit. For more information on the credit, contact a tax planner or visit the IRS website at: http://www.irs.gov.

Home sales contracts rise for 8th straight month

Real estate rally attributed to first-time homebuyer tax credit that expires at the end of November.

The number of signed sales contracts to buy homes rose in September for the eighth straight month, according to a real estate industry report released Monday.

The September Pending Home Sales Index from the National Association of Realtors (NAR) spiked 6.1% to 110.1, consolidating a 6.4% gain in August. It was the index’s highest level since December 2006, when it stood at 112.8.

The leap was far better than expected. A panel of analysts surveyed by Briefing.com had forecast a 1.2% rise.

Analysts, including Lawrence Yun, NAR’s chief economist, have traced much of the improvement to the government’s first-time homebuyer tax credit program, which gives an up to $8,000 tax break to new homebuyers. It’s estimated that between 200,000 and 400,000 additional sales will have been made because of the credit.

“What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,” said Yun.

The credit lapses after Nov. 30, and the housing industry is bracing for a major turndown in sales if Congress fails to pass some kind of extension.

“Clearly, buyers were eager to get business done before the credit’s November expiration,” said Mike Larson, a real estate analyst for Weiss Research. “So I wouldn’t be surprised to see some give back in pending sales over the next month or two.”

Favorable long-term prospects

Any fall-off should only be temporary, however, according to Yun. Market conditions are just so favorable for buyers right now that sales should rebound quickly should they suffer through a hangover following the tax credit demise.

With home prices well off their highs and mortgage rates still extremely low, the cost of homeownership is well within the range for many Americans who are not homeowners today. There are, Yun estimates, about 3 million renters who are now financially well-qualified to buy a median-priced home.

“As long as buyers do not overstretch and stay well within their budget, a sizable pent-up demand can be tapped among financially qualified potential buyers,” he said.

That will not translate into a new boom, however, according to Larson. “No explosion of pent-up demand will send markets to new heights,” he said. “The economy is still not in fantastic shape.”

Housing markets certainly do not seem to be out of the woods, but this latest release added to a modest winning streak of positive recent reports. Prices appear to have stabilized, with the S&P/Case-Shiller Home Price index up four months in a row and completed sales of existing homes at their highest level in two years.

Foreclosures, however, continue to plague many markets, adding to supplies on homes for sale, according to Yun.

“An excess of homes remains on the market despite recent improvements,” he said. “Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline.”

Increased pending sales are a forward-looking indicator since contract signings precede actual closings; they typically take place two to three months later. Although some contract signings fall through, a jump in signings in September usually means NAR statistics on December existing home sales will improve

NEW YORK (CNNMoney.com)

Tentative deal to extend the first-time homebuyers’ tax credit

Washington (CNN) — Senate leaders have reached a tentative deal to extend the first-time homebuyers’ tax credit that was originally passed earlier this year as part of the stimulus bill, Republican and Democratic sources told CNN on Wednesday.

The agreement would extend and expand the credit to include current homeowners who want to move, according to the sources.

The original credit in the stimulus bill is set to expire at the end of November and offers a tax credit of $8,000 to first-time homebuyers.

Senate sources told CNN they have tentatively agreed to extend that $8,000 credit for first-time buyers until the end of April.

In addition, they are adding a $6,500 credit for some current homeowners who buy a new residence by then.

To qualify, current homeowners must have lived in their primary residence for five continuous years.

Senators have not agreed on how the tentative deal would come up for a vote, but sources from both parties said they are considering adding the housing credit to a bill that would extend unemployment benefits.

House Speaker Nancy Pelosi has indicated she also is interested in extending the homeowner credit, but House leaders have yet to endorse any one bill.