The results of the Obama Administration’s 2009 First-Time Homebuyer’s Tax Credit helped to generate more than 1.1 million sales that closed prior to November 30th, 2009. In a market desperate for good news and sustainable initiatives, the National Association of Realtors, the country’s largest trade organization, lobbied hard for an extension of the bill and for expansion of the benefits.
While the government declined to pass the recommended increase in the outright tax credit to $15,000, the Obama team did expand the plan to cover existing homeowners seeking to relocate with a maximum $6,500 tax credit. Prior to the great recession, the American homeowner typically bought and sold more than 8 residences prior to retirement. Since the recession, existing homeowners have been sitting tight, significantly lowering the demand for existing upscale homes. High-end prices have taken the biggest hit in terms of value and units sold.
The new initiative also increased the income eligibility for single filers and for joint filers. The single filer can now earn as much as $125,000 while joint filers can now earn as mush as $225,000. The value of the new purchase cannot exceed $800,000 and qualified applicants can claim up to $6,500 or 10% of the purchase price. The tax credit for first time homebuyers remains stable at $8,000.
An existing homeowner must have occupied their home as a primary residence for the last three years. First time homebuyers and existing home purchasers have until April 30th, 2010 to enter into a contract for purchase and sale and must close the transactions on or before June 30TH, 2010.
The Administration and the FHA have greatly streamlined the application and acceptance mechanics, which were once considered laborious. As realtors and mortgage lenders became familiar with the 2009 program, it gained wide acceptance. As such a contingency for tax credit acceptance can now be included in most real estate purchase offers. In fact, new programs allow for the use of the credit to be applied to closing costs and help with the down payment.