$7500 First Time Homebuyer Tax Credit - Is It A True Credit?

Is the $7500 first time homebuyers tax credit that we have been hearing about truly a tax credit similar to the child tax credit? The answer is NO! In truth, this tax credit is really an interest free loan from the federal government to be repaid over 15 years.

This is how it works:

1. A first time homebuyer that purchases a home after 4/9/2008 files for the $7500 tax credit on his/her 2008 federal taxes and receives a nice return. For example, if you owe $5000 in federal income taxes you would pay nothing to the IRS and receive a $2500 tax return from the government. If you are due $1000 tax return, you would get an $8500 tax return with this tax credit.
2. Here's the kicker. When this first time homebuyer files his/her 2010 taxes if they claimed the credit on their 2008 taxes, they would have to pay $500 back to the government on top of what they already owe on their income taxes or to be deducted from what they would be getting as a tax return. The reason why I state 2010 is because the buyer doesn't have to start repaying the credit until two years after the tax year in which the credit was claimed. For example, if you owe $5000 in federal income taxes you would be required to pay $5500 to the IRS. If you are due a $1000 tax return, you would get a $500 tax return instead. This would continue each year for up to 15 years until the $7500 is repaid.
3. If the first time homebuyer sells the home, the remaining "credit" would be due from the profit of the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

Not all people will qualify for this tax "credit" or for the entire $7500.

Who qualifies:

1. A first time homebuyer is defined by law as someone who has not owned a home or has not owned a home in the past three years.
2. First time homebuyers that purchase their home between April 9, 2008 and July 1, 2009.
3. Single or head of household buyers can claim the full $7500 if their adjusted gross income (AGI) is less than $75,000.
4. Married couples filing jointly can claim the full $7500 if their combined AGI is less than $150,000.
5. Single or head of household buyers who earn between $75,000 to $95,000 AGI are eligible for a partial "credit".
6. Married couples filing jointly who earn between $150,000 to $170,000 AGI are eligible for a partial "credit".
7. The "credit" is NOT available for single buyers earning greater than $95,000 AGI and married couples with an AGI that exceeds $170,000.

So, should you file for this "credit"? If you are in good credit standing and in no need of some immediate cash, I wouldn't. This will hang over your head each year until the "credit" is paid off and if you decide to sell before the "credit" is repaid, you would be responsible for paying the remainder of the "credit" in full from the profit of the home. Thus, no additional money to put on the downpayment of your new home. Now that you have the knowledge, the choice is yours.

For more information on this first time homebuyer "credit", contact your accountant and/or visit http://www.federalhousingtaxcredit.gov/ .

Flower Mound and Southern Denton County Housing Market

Several people have come up to me over the past few months with questions about the housing market in Flower Mound, Highland Village, Double Oak, and surrounding areas. I have decided to post on real estate market statistics about several DFW areas that our team works to inform buyers and sellers what it is really like out there, starting with Flower Mound and S. Denton County.

Here are the hard, cold facts:

S. Denton County - August 2008 YTD - Single Family Residences:

Number of Sales: 2648

Percent of Change vs. Prior Year: -20%

Average Sales Price: $241,672

Percent of Change vs. Prior Year: -4%

Average Days on Market: 69

Percent of Change vs. Prior Year: +25%

So what does this all mean? To you, the homeowner, it means that you can still sell your house in an average of 69 days and possibly sell it for 4% less than August of 2007. In numbers, that works out to a sales price on average of $241,672 this year versus a sales price of $251,338, a difference of $9666.

At first thought, this can seem doom and gloom. However, you can look at it a different way. Now is the PERFECT time to buy if you have good credit. You just have to change your perspective. If it were a sellers' market, you would get an awesome price on your house but you would also pay a pretty high premium on your next one. This can be your opportunity to lease out your current home and get a great deal on your dream home. You can also sell your current home and still make up for the difference on the buy side. I just represented a buyer today that purchased a home owned by a relocation company. The relo company had to bring $30K to closing. The payoff was $15K more than my client's sales price. Now, this is rare and won't happen in every situation, but deals are out there if you are patient. Relocation companies will also generally not accept a contingency on the sale of another home, but if you were going to lease your current home, what a perfect opportunity!

If you are ready to move, you can still do it! You can still sell your house in a reasonable amount of time and you can get a good deal on your buy. You just have to be ready to go for it!

We're the 2008 Reader's Choice Award Winners!

Today our team was presented with the 2008 Readers' Choice Award for Best Realtor(s) in Flower Mound and Lewisville by the Star Community Newspapers (Flower Mound Leader and Lewisville Leader)! What an honor! Subscribers or newspaper buyers filled out a ballot insert in the paper and wrote in their choice for best Realtor and mailed the ballot in. This is the first year that we have been receipients of this award and we are thrilled! Our brokerage, RE/MAX DFW Associates, won the best real estate brokerage in Flower Mound in Lewisville too.

We are really striving hard to provide our clients with excellent customer service and apparently it is paying off! We want to be the "Disney" of real estate. Look for us in next week's paper!