Last Chance for the First-Time Homebuyer Tax Credit

The first-time homebuyer tax credit was renewed in November, but time is once again running out. In order to qualify for the tax credit, you will need to have a home under contract by April 30, 2010 – and you will need to close on that house before June 30th.

My point is, if you want to cash in on the tax credit, you had better get crackin’. The April 30th deadline gives you only a little more than two months to find a house, make an offer, negotiate with the seller, and sign the contract. Two months – that’s a tall order. If you don’t get started soon, you may find you can’t get in under the deadline!

If you are thinking of buying a home this year, you definitely won’t want to miss out on this tax credit. Despite the name, it’s not available only to true first-time homebuyers, so don’t assume you can’t take advantage of it! When the tax credit was renewed in November, the new legislation made it so that just as long as you haven’t owned a home in the last three years, you can get the full $8,000 credit. In fact, even if you have owned a home, as long as you have lived in the same house for five consecutive years out of the last eight, you can get a tax credit of up to $6,500.

Another reason why you don’t want to pass this one up: Unlike previous first-time homebuyer tax credits, this one is basically free money. Previous legislation required that the tax credit be repaid, whereas the new legislation does not. However, you will have to live in the home for at least three years before you rent it out or sell it; if you don’t, the credit will need to be repaid after all.

There are some other requirements as well. For one thing, the home you are buying has to be your new primary residence in order to qualify for the credit. That doesn’t mean that you have to sell the old house, though – the legislation doesn’t require you to, leaving you able to keep your old home and rent it out if you want. You will also have to make less than $125,000 a year ($225,000 for couples) to qualify for the full $8,000. If you don’t qualify for the full amount, you can still get a partial credit if you make less than $145,000 ($245,000 for couples).

As you can probably imagine, the generous terms of the tax credit is making a huge impact on the real estate market. As of last fall, it was estimated that 1.4 million taxpayers nationwide had taken advantage of the credit. Economists are anticipating another 500,000 homebuyers to use the renewed credit between November 2009 and the expiration date of June 30, 2010.

And we’re definitely seeing the results of the tax credit in Southwest Florida. October and November were both very strong months in both pending and closed sales, and although the renewed legislation gave homebuyers seven extra months to get the tax credit, sales remained strong in December as well. Many experts expect moderate growth in the first quarter of 2010, with exceptionally strong sales numbers in the second quarter, right before the tax credit expires – this time for good.

That’s right – this time the tax credit is not expected to be renewed. If you want to take advantage of the credit, you’ll have to act fast – you have less than three months to sign a contract. That means that in the next 10 weeks or so, you will need to find a home you like well enough to buy it (and live in it for three years), negotiate with the seller on the terms of the sale, and get it all on paper. And even then, you will have only two months to get the inspection done and work out any kinks before you close. Failing to meet these deadlines means that you will miss out on a free $8,000.

You’ve probably heard people use the saying before, “Time is of the essence.” It couldn’t be truer than in this case. If you don’t get started now – and I mean now – you may miss out on this amazing deal. In fact, what are you still reading for? Pick up the phone and call your agent, or start browsing for your dream home online. The sooner you get started, the better your chances of still getting it in under deadline!

D. Michael Burke, P.A. Keller Williams Elite Realty
Michael@CoconutPointRealEstate.com / www.CoconutPointRealEstate.com