$8000 Federal Tax Rebate Updated

First-time home buyers and move-up buyers have another great reason to get off the fence, pre-approved and on the road to purchasing a home! The benefit to first-time homebuyers is a tax credit up to $8,000 and for move-up buyers a tax credit up to $6,500. But this opportunity ends in April.

• Between November 7, 2009 and April 30, 2010, homebuyers that have a signed binding contract to purchase a home may be eligible for the tax credit. The transaction must close no more than 60 days after April 30, 2010.
• First-time homebuyers may receive a credit of 10 percent of the purchase price, up to the $8,000 tax credit amount. If you have never owned a home before or have not owned a principal residence in the last three years, you are considered a first-time homebuyer.
• For home-owners, a tax credit of $6,500 is available for homeowners who have lived in their current residence for at least five of the past eight years. Homebuyers can also receive a 10 percent credit up to $6,500 when they contract to purchase a home between now and April 30, 2010, provided they close no more than 60 days after this deadline.

The tax credit does not have to be repaid provided you live in the new home for a minimum of three years. Military families are exempt from this stipulation.

For an exhaustive and detailed Q & A by Sonia M. Younglove, Esq., see the latest California Association of Realtors extensive article on this subject.

1. Who is a First-Time Buyer? The bill defines a first time home buyer as anyone who has not owned a property/home/real estate for the past three (3) years.

2. How does the Tax Credit Work? The tax credit is received when you file your taxes the year after your home/real estate purchase. In other words, the first time home buyer does not receive any cash at the time escrow closes, nor does the 1st time home buyer receive any assistance with closing costs through the escrow. Instead it is added to any refund you would be due on your taxes in the year following your home purchase.

3. Can I Receive theTax Credit of $8,000 Even If I Owe No Taxes?: You, as a first-time home buyer, can still qualify even if you own little or no taxes.

4. Do I Have to Pay Back the $8,000 Tax Credit?: In a previously conceived bill, the first time homebuyer had to repay the $8,000 tax credit. In the current Stimulus Bill, the 1st time home buyer need not repay the $8,000 tax credit as long as the home buyer resides in the property for at least three (3) years.

5. Are There Time Limitations Attached to the $8,000 Tax Credit?: The $8,000 Tax Credit is available to buyers who purchase a property/home/condo/residence between January 1, 2009 and December 31, 2009.

6. Are There Income Limitations Attached to the $8,000 Tax Credit? If you are single, first time home buyers must make less than $75,000 Adjusted Gross Income; if you are married, first time home buyers must earn less than $150,000 combined Adjusted Gross Income. If you earn more than this amount, then the total tax credit is reduced.

In sum, if you are a first time homebuyer and are considering purchasing a home, you may want to take advantage of this tax credit. Home values have declined on average between 25% and 40% from the highs, interest rates are extremely low (hovering around 5%), and the government is giving you an $8,000 tax credit to purchase a home.

Here is A First Time Home Buyer Fact Sheet on the major changes that have occurred as of January 1, 2009.

Here is the IRS Form you will need to complete in order for you to receive the first time homebuyer credit.

Here are frequently asked questions regarding the $8,000 Tax Credit:

Here are some tips from the IRS on First-Time Homebuyer options in order to maximize the new tax credit

Photo Courtesy of NBC.com
The buzz in home purchases/sales revolves around distressed properties these days–namely, REO’s or bank-owned homes. If there is one story that peaks a buyer’s interest, it is the REO home market. The reason is simple enough: the buyer believes that REO’s equal great deal or steal. But are bank-owned homes the real deal? Let’s take a closer look:

If you happen to be a first-time homebuyer or a novice in terms of the homebuying process, an REO (Real Estate Owned) home or bank foreclosure requires seeking the assistance of a knowledgable real estate professional. At first blush, the pricing may look enticingly attractive.

In her article entitled “Foreclosure Sales And Pretend Pricing,” Kris Berg of The San Diego Home Blog writes that the “pretend pricing method or (PPM) is an entirely different and oft-mysterious approach to the whole conundrum of determining what the market value really is for a home. Once a lender has foreclosed on a home, the PPM comes into play.”

Foreclosures are often priced 20-30% below a “regular sale”–that is a home that actually has equity in it and is not over encumbered or “under water”, so to speak. That said are REO homes real deals or not? Most home foreclosures are priced way under the market just to create hype. Welcome to the wild west side of the home pricing market. These properties will garner multiple offers with the final sales price often thousands of dollars above the original asking price. Not only does this breed disappointment, disillusionment and frustration among buyers who are looking to own and occupy the property, but these homes typically will sell to the highest bidder who also has a large cash down payment.

As a first-time home buyer, you should factor in whether you will have the time and money to fix up a bank-owned property. These properties more often than not have deferred maintenance issues, missing appliances, fixtures, or have been trashed by disgruntled owners or renters. Remember that bank-owned properties are sold in “as is” condition. The bank need not provide the buyer with many of the disclosures that are normally completed by a seller in the normal course of a home purchase/sale. The buyer is on his or her own to pay for inspections to ensure that the home’s condition is reviewed and verified by licensed and bonded home inspection companies.

It is also prudent to check out the neighborhood thoroughly; how many homes/condos have “for sale” signs. Too many homes up for sale may be an indication that there could be further erosion of prices in the community. Since prices have declined in many of the newly built communities, most of these homes or condos will have fallen back to or below the original prices offered by the builders. Look in neighborhoods that have limited supplies of housing inventory. Also check out the neighborhood’s schools for their ratings. Even if you do not have children or are not be planning to start a family, there is a correlation between high school ratings and housing values. Neighborhoods that are known for their excellent schools will have less price erosion and will see prices stabilize sooner than school districts that are poorly rated.

Remember the old axiom, “Let the Buyer Beware.” Sellers have an obligation to disclose defects, history, and the condition of the property, while with bank owned properties, they do not have any responsibility at all to the buyer except to try to recapture as much of the assets or limit the loss for their investor. Therefore, when searching for a home use caution, utilize due diligence, and do not be rushed into a quick decision or your home purchase may become tomorrow’s REO property.