NAR Frequently Asked Questions
Homebuyer Tax Credit Changes
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001
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.
According to MSNBC, the Senate has approved extension of the tax credit for first time homebuyers. This is good news for the real estate industry... and for first time homebuyers. There is a provision for a $6,500 tax credit for repeat buyers. I'm sure we'll hear more when the extension gets final approved.
Today we received a RE/MAX brochure in the mail. It's a very nice mailing with information about investing, short sales and some of the new enhancements on REMAX.COM. REMAX.COM shows over 90% of all listings. And, RE/MAX has the most productive sales force in real estate. But, the thing that I appreciate most is the mention of the Certified Distressed Property Expert designation. RE/MAX has almost 60% of agents with the designation to help owners get a short sale processed most efficiently. If you or someone you knows needs help to avoid foreclosure, call me at 706-296-4395.
With the slower economy, most real estate franchises have cut back on advertising. RE/MAX is continuing to make new TV commercials and this latest mailing shows the corporate offices committment to supporting the RE/MAX agents. This year, there was a mailer for first time homebuyers (don't forget the $8,000 tax credit!) and one about investment opportunities.
I am a Certified Distressed Property Expert and handle short sales for homeowners with a hardship that has caused them to be unable to pay their mortgage payments. I know this is a terrible stress for many and I am happy to be able to provide the service. There are many steps to a short sale that will make it move along quickly. I have the knowledge and am actively seeking homeowner that need my service to avoid foreclosure.
I am currently working on 4 short sales and 3 of them are with Bank of America. One of these properties was listed in November of 2008. We listed the home at a fair price and slowly reduced the price until we received an offer. Once I got the offer ready along with the 68 page package of information, it was sent in to Bank of America. I understand that the banks are not able to keep up with the number of short sale offers being submitted. However, after a year, you would think this could be worked out. I know Bank of America can process a new loan quickly. Couldn't the same processors be allowed to do some of the work on short sales? Even if it did have to go to a "final negotiator", at least the basic information could be verified by a local employee.
The process that's being used now
is not working. An offer I received in March was terminated in June after the bank gave a counter offer that was $10,000 over the price the home was listed at at that time. I had documented all showings and price reductions and it was obvious that nobody was interested in buying the house at the higher price. Not this buyer either... then the negotiator asked if I could get $5,000 more. This buyer was not in the mood to negotiate after waiting 4 months with no communication from the lender.
I increased the list price by $10,000 more than the price at that time. Nothing... so, I started reducing the price. When it was back to the same price that had gotten offers last time, I got an offer. Actually, I ended up with one excellent offer and 2 back up offers that were also good offers. After 3 months, the first buyer terminated, then the 2 back up offerers increased their offers. After about 2 weeks, one of them terminated then a month after that, the 2nd one terminated.
During this process, I was checking with the bank every week to get an update on the status. I was getting nervous that I wouldn't have an offer when the bank decided to let me know if they would accept. I wouldn't dare tell them that the buyer had walked. Then they'd just close the file and I'd have to start over for the 3rd time. Luckily I now have 2 offers, both lower than the many that have terminated. And still no word from the bank, other than that I should hear something in the next 30 days.
To make it worse, I have managed to stop foreclosure twice on this property. However, every time, the foreclosure attorney sets it up for 2 months later. Then, when that time comes, I call Bank of America and they tell me it's not set for foreclosure. However, it's being advertised in the newspaper and the closing attorney says they have authorization from Bank of America to sell it. Monday, I can start requesting that the foreclosure be stopped -- they only allow me to start the process 5 days prior to foreclosure!
This house has been vacant for about 9 months and neighbors are calling me to get the grass cut, the property is showing many signs of neglect. One neighbor called to tell me that a tree fell from this property and hit his fence. I don't know how all this will work out in the end. The current homeowner has moved, has many health problems, has lost a signification source of income, and is unable to take care of anything associated with this home.
Some of the banks have been excellent to work with. If it wasn't in everyones best interest to do short sales, I would be able to understand. However, the average cost for a foreclosure is $30,000-$40,000. If we can get a home sold for $10,000-$20,000 under the current market price, that's got to be a better deal for everyone.
Benefit for the homeowner - no foreclosure, they can stay in the house until it sells, and a short sale is much less damaging on the credit report than a foreclosure.
Benefit for the lender - no foreclosure - they don't have to be reponsible for upkeep of property, don't have to go through the process of securing property, getting the propety in saleable condition and maintaining the property until it sells. Buyers see foreclosures as a better opportunity to get a great deal, usually making lower offers. Many times foreclosed properties have damage that can be very expensive to correct. If a buyer is getting an FHA loan, certain repairs must be made to qualify for the loan.
Even though it can be difficult to get a short sale approved, I will continue working on them. It is so rewarding to help an owner that feels like he's at the end of his rope. This can relieve a tremendous burden from a distressed owner.
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