First Time Buyer and Current Homeowner Tax Credit Ends April 30thSome Common Sense Tips for all Involved.
“Only Robinson Crusoe had everything done by Friday."
The $8,000 First-Time Home Buyer Tax Credit will end April 30th. End means Friday April 30 is the last day to write a contract that qualifies. The transaction must also close by June 30th, which should be plenty of time.
In Texas, the “Effective Date” of the contract is written in by the agent after that last signature or initial has been placed on the contract. That’s the official contract date, and the date from which all time related matters are counted. It reflects the date the transaction becomes a “done deal” or finished.
Say you buyer misses the date by a few days. Can you backdate the contract and thus get him the $8,000.00 credit.
Is that legal?
No. We would not allow our seller to back-date the contract. It would be improper. To do so would be assisting the buyer with tax fraud. The IRS tax rebate rule states that the buyer must enter into a “binding contract before May 1st”. A contract does not become binding until signed and initialed by all parties, therefore an offer submitted After April 30th cannot have an April 30th Effective Date.
What if negotiations are complete by April 30th, the parties agree on terms, we have email confirmation from both parties, but the final signatures are not gathered until May 1st? Then May 1st would be the Effective Date, and the deal would not qualify for a tax rebate for the buyer.
Hopefully no one will fall into the trap of back dating a contract, but I know it’s going to happen to someone somewhere. Human behavior is predictable and people procrastinate.
First-time buyers should make an effort to write your offer before April 27th, to allow plenty of time for negotiation and signatures. Sellers should be prepared to respond quickly to offers at the end of April in order to accommodate your buyer. Good communication will go a long way.
- As a seller, you’d hate to lose a good offer because the buyer changes her mind after not being able to get things wrapped up with you by April 30th. So be ready and available.
- And as a first-time buyer seeking the tax rebate, you’d be dumb to write anything other than a clean offer after April 27th if you hope to be wrapped up by the 30th. Make it easy for your seller to sign off.
- Make sure your agent knows how to write a clean, error-free offer. You’d be surprised how many agents don’t know how to write a clean offer so read it carefully and make sure you understand the implications of every fill-in blank, every checkbox and every date.
- Ask why the blanks are filled in the way they are and whether the seller would object to anything on face value, such as asking seller to pay for a new survey.
- Don’t write in silly provisions, the wrong Title Company, or unreasonable provisions such as a 15 day option period for $50.
- Have your pre-approval letter ready and include it with the offer.
- Again, good communication between the agents up front should make things go quicker.
- Now let’s get out there and close some deals before the deadline. Call some of your clients who are fence sitting today and remind them of the deadline.
What else do I need to know?You have to submit a contract on your home by April 30, 2010.
- You must be a first-time homebuyer. You cannot have property in your name anywhere in the U.S. for the past three years to be considered by federal standards as a "first-time homebuyer."
- Income limits to apply to this credit. The full credit is available to individuals with an annual income of less than $125,000 and couples with an annual income of less than $225,000. A partial credit may be available to individuals with an annual income between $125,000 and $145,000, and couples with an annual income of $225,000 to $245,000.
- You must submit a contract on a house between January 1, 2009 and April 30, 2010. (Note: Settlement must occur before July 1, 2010.)
- This credit does not have to be repaid if you stay in your home for 3 years or more. If your home is sold within three years of purchase, the entire credit is recaptured.
For more information:
This is new legislation for this year. We recommend you contact your lender, your realtor, or your tax professional for more information on making use of this tax credit.
Federal Homebuyer Tax Credit: Current Homeowners
American Recovery and Reinvestment Act of 2009 & Worker, Homeownership and Business Assistance Act of 2009
This credit is part of the federal stimulus bill, signed by President Barack Obama on February 17, 2009 and extended on November 7, 2009. The Federal Homebuyer Tax Credit for Current Homeowners is a credit of up to $6,500 for qualified homeowners purchasing a new home.
There is a deadline! You must have a written binding contract to purchase by April 30, 2010. You will then have until July 1, 2010 to settle on your house.
Current Homeowner Credit Details:
- The tax credit is calculated as $6,500 or 10% of the home purchase price, whichever is less. This means a homebuyer can receive a $6,500 tax credit if the home sales price is $65,000 or more. If the home costs less than $65,000, they can receive a credit of 10% of the purchase price. (Ex. Buying a $50,000 home could earn you a $5,000 credit.)
- The tax credit is available to current homeowners who have used the home they are selling as their principal residence consecutively for 5 of the previous 8 years.
- The credit is available on home purchases between November 7, 2009 and April 30, 2010. For the purposes of this tax credit, a signed contract must be in effect by April 30, 2010; settlement must occur before July 1, 2010.
- The home purchase price must be less than $800,000.
- The home purchase must be for a primary residence only.
- The tax credit is not a loan and does not require repayment. However, if the home is sold within 3 years, the entire tax credit must be re-paid.
- There are income restrictions on this credit. You do not qualify for the full tax credit if a) you are single and make $125,000 or more, or b) are married and make $225,000 or more. Partial credit may be awarded to singles making between $125,000 and $145,000 and couples making between $225,000 and $245,000. See the below charts for these estimated partial credits.
Individuals with income between $125,000 and $145,000
- Income Estimated - Tax Credit
- $130,000 - $4875
- $135,000 - $3250
- $140,000 - $1625
Couples with income between $225,000 and $245,000
- Income Estimated - Tax Credit
- $230,000 - $4875
- $235,000 - $3250
- $240,000 - $1625
It will be interesting to see how the real estate market settles once the artificial buying motivation expires. Interest rates have been near all-time lows and may continue to be so in the near term before they presumably start to rise again either late this year or early next year. For a chart explaining the tax credits produced by the National Association of realtors click here.
This information is particularly applicable to permanent resident / value priced projects on the Texas coast like the The Galveston Dawn Beach Condominiums
- Marketed by Cat Viggiano of The House Company, Galveston’s Premier Realtors and representatives of The Dawn, Luxury Condominiums.
Located on the Galveston Island Seawall Boulevard along the water, all condominiums either have a balcony or open patio with amazing views of the beautiful ocean.
The Condominiums at Dawn Galveston Texas are close to many of the high-end and premier destination beaches and resorts that Galveston is so well known for including the Pointe West Galveston, Intracoastal Canal, Laguna San Luis and Crystal Beach Texas just to name a few. With a resort setting, the Galveston Dawn Condominiums and luxury waterfront properties provide an amazing array of onsite amenities that will include a secure gated entrance and covered parking.
The Dawn Galveston beachfront and waterfront condos in Texas also have one car garages available for additional costs in addition to two resort swimming pools and a large sundeck. With professional landscaping throughout, residents at the Galveston Condos Dawn real estate properties will think that they were living in a resort hotel every day.