2009-2010 Home Buyers Tax Credit

Homebuyer Tax Credit Extended and Expanded!

Last week, a new Homebuyers Tax Credit bill was signed into law. The bill extends the tax credit for first-time homebuyers (FTHBs), as well as opens it up to current homeowners who are looking to buy. And even if you aren’t looking to purchase – pass on this article to anyone you think might be in the market to do so. This is information that might benefit them greatly, and I’ll be happy to be of service to them.

Here is a brief overview of the Homebuyers Tax Credit – and its benefits – based on the new bill.

Tax Credit for First-Time Homebuyers

FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Tax Credit for Current Homeowners

The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available.

What’s So Great About a “Tax Credit”?

The benefit of a tax credit is that it’s a dollar-for-dollar benefit, rather than a “tax deduction”, or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sales price of $800,000.

Where is our Equity Phoenix? Appraisals and the new HVCC

Wonder why that home you just tried to purchase has a discrepancy between contract price and appraised value?  Do you know how your lender has to fight with the appraisal in underwriting just to try and make the deal your go to closing? 

 In 2009, the government introduces HVCC, the Home Valuation Code of Conduct, a set of rules created to prevent those who stand to profit from a real estate transaction from putting pressure on the appraiser.  In my opinion, this is leading to the stagnant market we are experiencing instead of allowing equity to return to our homes here in Maricopa Country and the Phoenix Metro areas.

The rules prohibit real estate brokers and mortgage brokers from ordering appraisals and require that lenders erect a firewall between loan production staff and the appraiser.  Since the rule out of this program, there has been protest not just in Phoenix but around the country.  The downtown of the market has been blamed on appraisers, saying they were working with the lenders to help increase property values.  Personally, I think the banks require far more of the blame, but that is for another blog.

 So now, with another extreme decision by our government, agents and lenders can have no control over appraisers.  We CAN talk to them only if contacted directly by the appraiser and only discuss the property’s condition and the contract price.  Before, if property value and appraisal were only off by $1000, the relationship between the lender and the appraiser would help bring the deal together.  There have been a ridiculous number of transactions which have fallen apart since the HVCC was ruled out in May, and many for less than 5%.

I understand there were some bad appraisers during the boom.  But now, when we are trying to regain some equity, it is nearly impossible to have an appraisal come in even any higher than the last comp which is keeping values stagnant.  For example, if the recent sales were $150,000, $152,000 and $155,000, the home will not appraise for $160,000.  It will likely come in at $156,000 or LOWER.  What if I had three offers within 48 hours, all between $155K and $165K?  Why are the appraisers not taking into account the demand for some of these (mostly distressed) properties and allowing them to sell at the highest bid??

This is really hurting FHA buyers as the appraisal sticks with the home for 6 months (although this will be changing to four months).  For example, if a buyer is trying to buy a short sale for $170,000 and the bank accepts this price, everyone is happy.  Well, what if the buyer’s lender sends out an appraiser and the property appraises for $165,000?  If the bank is not willing to budge, that appraisal sticks with the home and no other FHA buyers will be able to purchase the home for $170K unless they add $5,000 to their downpayment.  As a listing agent in this situation, he/she is limited to find cash or conventional buyers to help meet the value the bank needs at $170K.