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Buyer Information

Close by Sept. 30 to Receive Homebuyer Tax Credit

U.S. homebuyers who are eligible for a Homebuyer Tax Credit have until Sept. 30 to close the transaction and receive the credit.

Congress has extended the closing deadline, which had been June 30, by three months. The action affects an estimated 180,000 homebuyers who, because of circumstances beyond their control, had been unable to close on their purchase by the original deadline.

One factor in the backlog is that many of these transactions are Short Sales that often require extended time to complete.

Buyers who secured a purchase contract by April 30 are eligible to receive the credit. This is money that never has to be repaid, provided you live in the home for three years.

Qualified first-time buyers can receive a credit of 10 percent of the home price up to $8,000. You are considered a first-time buyer if neither you nor your spouse has owned a principal residence in the U.S. in the last three years.
 Homebuyers who owned and lived in their principal residence for five consecutive years of the last eight are eligible for a credit of up to 10 percent of the purchase price, up to $6,500.

The National Association of Realtors estimates that 4.4 million people have received the credit since it was made nonrefundable in 2009. That includes 2.9 million first-time buyers and 1.5 million repeat buyers.

Other facts about the Homebuyer Tax Credit:

  • The upper income limit to receive the full credit is $125,000 for individuals and $225,000 for couples.
  • If the purchase price is more than $800,000, you are not eligible for the credit.
  • You can apply the credit to the 2009 or 2010 tax years. There is no minimum income for claiming the credit. You qualify for the full credit even if you won’t owe any taxes for 2009 or 2010.
Buyer Information

Buying Foreclosures

Since Visalia is now more of a buyer's market because of the many foreclosures, also known as REOs and bank-owned properties, buyers have opportunities that have not been available to them for several years. Low prices, low interest rates, and lots of properties to choose from - it's a buyer's dream.

When looking to purchase a property that will meet your short-term and long-term goals while staying within your budget, it is important to determine if purchasing a foreclosure is right for you. Some buyers I have worked with asked to look at foreclosures because they wanted "the best deal." After taking the time to learn their needs, goals, and financial situation, I would then help them look for the best deal that would also be the "best fit." Sometimes the better deal was a foreclosure, and sometimes it was a well-cared for, non-foreclosure residence.


1.   Look before you leap.
      Examine your financial situation before you start looking. How much money do
      you have to invest in improvements for a home? Where will the money come
      from? Savings, credit, or your monthly budget? Determine if you can afford to
      buy a foreclosure.

2.  Show me the money.
The bank selling the home requires evidence of your ability to pay for the home:
     A pre-approval letter for the amount financed and evidence of funds for the
     down payment and closing costs, or for the full amount if you are paying cash
     for the property. 

     The banks love cash buyers because that often means they won't be asked for
     as many concessions and because there is no loan involved and no property
     conditions required by the loan or the appraiser. 

     Buyers who are getting home financing must restrict their purchase to
     properties that conform to the loan guidelines and that pass the appraiser's
     inspection. This means that certain properties may not be in a condition good
     enough to be purchased with certain loans - or possibly any loan. Keep in
     mind, the bank is selling the property in an as-is condition and may not be
     willing to pay for - or even allow you, the buyer, to pay for - repairs to be
     done to conform the property to meet the requirements. 

     Don't let this discourage you though. In our current market their are many
foreclosures that are in good enough condition for you to purchase with a

3.  Count the cost.
     Once you find the property you want, make sure you calculate the costs of
     repairs, especially for any big-ticket items such as a new roof or A/C and

4.  Avoid buying the money pit.
     The bank, unlike a "regular seller," has never resided in the property and
     cannot tell you anything about it. Inspections help to eliminate the element of
     surprise when it comes to making home improvements, so you don't end up
     owning a money pit. 

5.  When average is no longer average.
Average homes in average condition make better rentals than luxury homes
     when factoring in maintenance costs. So if you are handy, you could pick up
     a good property that just needs a little sweat equity, yielding you better cash

Out of time.
Many people live very busy lives and just don't have the time to make
     necessary home repairs. This applies not only to foreclosures but to other
     fixer-uppers as well. It is better to know your limitations before you buy.

7.  Let's Make A Deal!
Often foreclosures/REOs are left in need of repair, which can mean more
     leverage when negotiating price. Of course, the banks are not giving homes
     away, so keep that in mind when making offers. 

     Often buyers are surprised to find that some foreclosures are priced very
     aggressively - under market value - generating a lot of buyer interest and
     therefore getting multiple above-price offers.  

8.  For rent.
There are plenty of potential renters out there who have been displaced
     after losing their homes as a result of short sales and foreclosures. These
     folks need affordable homes to live in. Investors have a great opportunity to
     partake in win-win situations for themselves, the bank, and the renter.

If you are interested in learning more about purchasing a bank-owned property, or you are ready to start looking at foreclosure homes, please contact me. In addition to our traditional listings, RE/MAX Visalia has a large market share of the foreclosure properties in Visalia. We know what makes for a successful purchase of a foreclosure, whether it is one of our listings or one of another agency's. 

Buyer Information

Federal Tax Credit Extension

Homebuyers who qualify for the Federal Tax Credit are breathing a sigh of relief. Originally homebuyers needed to have a written contract by April 30th and complete their transaction by June 30th. The House and the Senate have both approved the measure to extend the tax credit until September 30th, giving homebuyers an addtional three months to complete their purchase and receive the tax credit. Now Congress has sent President Obama the plan to give homebuyers an addtional three months to qualify. I hope to be able to share the good news with you soon that the President has approved the measure.

Buyer Information

California's Tax Credit Monies May Go Fast

On tax day it seemed fitting to post information on how you can save money on taxes! Here is an article from C.A.R. (California Association of Realtors®) Legal Update that I received today about the California State Tax Credit. As always, I encourage you to seek specific advice from an accountant or tax professional regarding qualifying for this tax credit and other real estate related tax issues.

The $100 million allocated for California's first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.'s Economics team.  California's Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied. However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.'s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes. The FTB will update its website when the 2010 application form and other information become available.

For more information, please refer to C.A.R.'s Homebuyer Tax Credit Chart 2010.

Buyer Information

$18,000 in Combined Homebuyer Tax Credits For a Limited Time

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits.  To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive.  Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.

Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010.  Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied.  The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)).  California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)).  Other terms and restrictions apply to both tax credits.

For more information, C.A.R. offers a Homebuyer Tax Credit Chart with a side-by-side summary of the federal and California laws.  C.A.R. also offers a legal article entitled Homebuyer Tax Credit Update.


Buyer Information

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:

  • Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
  • Expands the credit to grant up to $6,500 credit to current
    home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.

Recent news:
IRS Releases Revised Tax Forms, Instructions for Claiming Tax Credit (Jan. 25)
Economists' Podcast: Lawrence Yun Discusses Market Recovery, the Tax Credit, and Employment (Jan. 12)
Economists' Commentary: Existing-Home Sales and the Tax Credit (Dec. 22)

Who Qualifies for the Extended Credit?

  • First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
  • Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

  • The maximum allowable credit for first-time home buyers is $8,000.
  • The maximum allowable credit for current homeowners is $6,500.

How is a Buyer's Credit Amount Determined?

Each home buyer’s tax credit is determined by two additional factors:

  • The price of the home.
  • The buyer's income.


Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income

Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009,  single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

Buyer Information

FHA Head: Don't Raise Down Payment

Now is not the time to raise the downpayment requirement on a Federal Housing Administration loan, warns FHA Commissioner David Stevens.

Stevens, testifying before a committee of the U.S. House, said his agency would probably insure 300,000 fewer home loans per year if the mandatory down payment was raised from 3.5 percent to 5 percent — a 40 percent increase.

Congress has been considering various ways to put FHA on a sounder financial footing. Besides increasing the downpayment requirement, another suggestion under discussion is raising the upfront mortgage insurance premium to 2.25 percent of the loan amount, up from 1.75 percent currently.

The National Association of REALTORS® also opposes the proposal to raise the mandatory down payment for an FHA loan. The FHA remains financially strong because it has taken steps to ensure solid underwriting standards and responsible lending practices, said Charles McMillan, NAR immediate past president, in testimony before the House Subcommittee on Housing and Community Opportunity.

"As the leading advocate for housing issues, NAR believes that one of the best ways Congress can help strengthen FHA is to quickly consider and pass legislation that would make current loan limits permanent," McMillan said. “It’s important to note that higher balance FHA loans perform better than lower balance ones. While some argue that higher balance loans put taxpayers at risk, such loans actually strengthen the program and reduce risk to the fund."

Explaining that FHA has played an important role in the recent housing and economic crisis by filing the gap left by private lenders, McMillan said FHA insured almost 30 percent of single-family mortgages in 2009 and more than 50 percent of first-time buyer loans. “Historically, FHA’s market share has hovered between 10 and 15 percent of all loans. And when the private market is strong enough to return, we welcome a reduced FHA market share,” he said.

McMillan said NAR was also concerned that FHA wanted to decrease seller concessions to 3 percent. Reducing seller concessions could put homeownership out of reach for many buyers, he said, because it could require buyers to pay more at closing.

SOURCE: Associated Press, Alan Zibel, and NAR (03/11/2010)