Buying A Home In Cleveland: Tax Buyer Credit Frequently Asked Questions

By
Real Estate Agent with Howard Hanna Real Estate Services

 

As  many people are aware, President Obama has official signed off on the Home Buyer Tax Credit Extension. We wrote an article last week about the specifics of the new or updated guidelines which you can read by clicking here.

In an effort to educate consumers on the specifics of the extension, the National Association of REALTORS® Government Affairs Division has put together an informative list of common questions and answers and we thought it would be helpful if we shared it with you.

Here are some of the most frequently asked questions on the changes to the Home Buyer Tax Credit, provided by the National Association of REALTORS®. 

 

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who

meet all eligibility requirements will qualify for the $6500 credit.

 

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a

new home. I have lived in my current home for more than 5 consecutive years and am within the new

 income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time

 I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment

(when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely

 to the date of purchase, which is generally the date of settlement.

 

Question:I am a first time home buyer but was not within the prior income limits at the time I entered into

 my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the

 new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

 Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill.

The income limit and other eligibility rules will look to your status as of the date of purchase,

which is the settlement date. So if the new rules have been signed when you go to settlement,

you should be eligible for the credit (or a portion of the credit if you're within the phaseout

range).

 

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found

a home with a non-negotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any

 amountabove $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an

absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting

since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the

other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you

will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until

2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible

for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the

last 8 years. The keyword here is "consecutive." As long as he lived in that house for 5 years straight what he

did since 3 years doesn't impact eligibility.

Question: I am an eligible first time home buyer. I entered into a contract to purchase on November 1,

2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as

if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst

case), the purchaser will be eligible for the credit.

 

An important thing to note about the Home Buyer Tax Credit is that first time buyers are eligible to receive UP TO$8000, depending on the price of the home they buy. While most buyers assume they get an $8000 credit automatically, the actual credit is  "the lessor of 10% of the purchase price or $8000". Therefore, if someone buys a home for $60,000, they will only be eligible for a $6000 credit.

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About The Authors:

This information is provided compliments of Amy and Dan Schuman, The Schuman Team Keller Williams Realty. The Schumans service both the East and West sides of Cleveland and have worked with numerous professional athletes, business owners, and executives who are relocating to Cleveland. They specialize in the Cleveland Ohio luxury home market and also enjoy working with first-time buyers as well.

If you are looking to buy or sell Cleveland real estate, including the surrounding suburbs, please contact the Schuman Team at 216-346-3235. 

SEE ALL CLEVELAND AREA HOMES FOR SALE BY CLICKING BELOW:

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 CHECK OUT THE SCHUMAN TEAM'S AWARD-WINNING WEBSITE

 

Buying A Home In Cleveland: Tax Buyer Credit Frequently Asked Questions is the property of The Schuman Team and may not be duplicated or used without their written consent. ©Nov 2009   

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