The new-and-improved federal homebuyer tax credit can benefit not only first-time homebuyers but also homeowners who want to sell their current home and buy a new one.The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it. Here's what you should know:
1. Deadline: April 30, 2010The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
That deadline is much sooner than it may seem: Many buyers take months to locate a house, and closing a transaction typically takes 45 to 60 days.
First-time buyers should get started soon because they may face a lot of competition from other buyers who also want to purchase a moderately priced home, according to Ann Pettijohn, a broker and owner of Oaktree Realtors in Orange, Calif. That price range is "very popular" and those homes tend to sell more quickly than higher-priced homes, she says.
Buyers who wait until 2010 may also find fewer homes on the market from which to choose, according to Allyson Bernard, broker and owner of Real Estate Professionals of Connecticut.
"Smart buyers will be out during the holidays when other people are preoccupied," she says.
The short deadline may create even more of a crunch for homeowners who need to sell their current home and purchase a new one, Pettijohn says. Sellers need to be realistic about the value of their current home and put their home on the market as soon as possible, so they'll feel confident about buying their next home, she says.
“Smart buyers will be out during the holidays.”
Buyers who get behind the curveball shouldn't count on another extension to keep them in the game since Sen. Johnny Isakson, R-Ga., a former Realtor and the principal supporter of the legislation that extended and expanded the credit, has said in a statement that the tax credit won't be extended again.
2. Credit up to $8,000 or $6,500Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominum that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.