Tag Archives: Home Buyer Tax Credit

Did the Home Buyer Tax Credit Help the Market?

Posted on June 8, 2010 | Leave a comment

Nick Timiraos of The Wall Street Journal Developments Blog wrote a piece last week noting that the Home Buyer Tax Credit might have actually had the effect of spurring home sales and helping the housing market rejuvenate. He notes that seasonally adjusted existing home sales were up 7.6% in April compared to March, and that new home sales were up a seasonally adjusted 14.8% from March to April.

This is fairly consistent with what we saw on the street, in our market of the Hudson Valley in New York State.  We saw a literal explosion of activity in April, with our company having by far the biggest month in our history for new transactions in contract.  Moreover, the overall market seemed to jump as well, with increases of about 50% from last year in most of the counties we service.

The question now becomes whether the increase in home sales was simply a reallocation of sales from the summer to the spring – that is, did the tax credit pull transactions that would have taken place in the summer, or did it actually create transactions that otherwise would not have existed?  My take on this is that most of the increase was simply a reallocation, but the fact that the market was up in some of our higher priced counties indicates that the overall market did experience a lift.  For example, we service Westchester County, where the median sales price of almost $600,000 is beyond the reach of most qualifying tax credit buyers; nevertheless, sales were up 59% from the previous April. The tax credit cannot account for that kind of increase in a higher priced county. 

That said, as I write this, we’re definitely experiencing a relatively slow May.  Whether that’s because agents and buyers are simply exhausted from the rigorous activity of April, and focused now on getting this large pipeline of open transactions to the closing table by the end of June, or whether it’s a sign that the market is going to slow through the summer, remains to be seen.

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Getting Closed by June 30th — the Hard Deadline

Posted on May 15, 2010 | 3 Comments

Okay, the tax credit boom is over, with April 30th slamming shut the window for prospective purchasers to get into contract.  We saw an enormous boom in business in April as the credit wound down — at our real estate company, we had the biggest month in the 25-year history of the company, transacting three times the number of homes as April 2009.  We expect that companies across the country had the same types of results.

Now, the question becomes what you need to do to get closed by June 30th if you want to claim the credit.  One of the complications of all this is that real estate agents, at least in my area, are simply not used to juggling this many open (i.e., in contract) transactions and trying to get them all closed at once.  Five years ago, they were more practiced at that, but most of them have not had the luxury of having multiple deals at a time during the slowdown in the market.  So let’s make sure these contracts get to closing on time.

Here’s what you need to do:

  1. Communicate your situation. Make sure that everyone on your team — your agent, lender, attorney/escrow agent, engineer, and even the seller knows about your June 30th deadline.  I would send out a blast email to everyone reminding them of everything that needs to be done by that time, and making sure they know you’re on a true hard deadline.
  2. Get Organized. Take out a piece of paper.  Write down everything that has to be done to get you to close.  Indeed, call all your professionals helping you and ask what they need to do, and when they need to do it, to get you to close.  I’m a big believer in “checklists” as a means of ensuring attention to detail.  This is the perfect time to execute a checklist of all the things that you need to do to get closed.  Turn your checklist into a project plan that you’ll send to each of your professionals, and then stay on top of them to make sure they’re complying.
  3. Give yourself wiggle room.  Don’t plan a closing the last two weeks of June.  Try to schedule before that, so that you don’t end up losing your tax credit due to a last minute screwup.  No matter how prepared you are, you’re going to run into problems somewhere along the line.  So give yourself wiggle room

One way to avoid those types of last minute problems is to ask each of your professionals to identify things that could go wrong, so that you’re aware of them.  If there are documents that sometimes are required at the last minute, go get them now.  For example, it’s a great idea to gather all those old pay stubs, contact info for past employers, and everything else that your lender might be asking from you at the last minute.

If anyone else has other suggestions, I’d love to hear them.

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Posted in Deadlines, Home Buyer Tax Credit, IRS

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Last week for the Home Buyer Tax Credit: What does it mean to get into “Contract”

Posted on April 26, 2010 | 2 Comments

With the impending expiration of the Home Buyer Tax Credit, we had a few questions this week about what it means to be “in contract” for purposes of eligibility for the credit. The legislation revised in November requires that eligible home buyer be in contract by April 30, and closed by June 30th, which was actually the first time that Congress put a dual-deadline approach to the credit.

That is, in previous versions of the credit, Congress only set out a closing deadline, which is a much easier demarcation.  Everyone knows what it means to be “closed,” particularly because a “closing” is a fairly formal procedure involving all sorts of legal documents, including bank documents.  As such, it’s very difficult to “fake” a closing date to purposes of claiming a tax credit to which you’re not entitled — you would need not only your settlement service (and attorneys) to be on board, but you’d also need the banks to sign off on loan documents with an inaccurate date.  Good luck with that — another word for changing dates on a federally insured loan document is fraud, and it’s a good way to end up in jail.

But the question now becomes what constitutes a “contract” for purposes of the tax credit, and whether the IRS has any rules about what a “contract” means.  In some parts of the country, buyers make offers on properties through their agents, and sign a “purchase offer” that is akin to a contract, particularly if that offer is then signed by the seller.  That signed document might then be submitted to attorneys, or it might actually be the formal contract of sale.  In other parts of the country (such as downstate New York), agents simply present informal offers, which are then turned into a binding contract of sale prepared by attorneys.

So we expect that in parts of the country that do agent contracts, buyers are going to be able to claim the credit right up to the Friday deadline.  In other parts of the country, such as where we have our brokerage in the Hudson Valley of New York State, buyers might have difficulty getting into contract by Friday if they don’t already have attorneys working on them.  For buyers in those areas, we would suggest that they use a signed purchase offer as the “contract,” since a signed agreement with the sellers, even if it is subject to attorney approval, would probably satisfy the IRS requirement of a contract by April 30th.

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Confirmation that the Marriage Penalty in the Home Buyer Tax Credit will not apply to married couples with one spouse on title.

Posted on April 21, 2010 | 13 Comments

Today, we received further confirmation and clarification from the IRS that the Marriage Penalty in the Home Buyer Tax Credit will not prevent a married couple from claiming the credit in cases where one spouse is on title, but the other spouse is not. As you might remember, we were concerned that the IRS would literally read the language of the tax credit legislation to require that both spouses trying to claim the long-time homeowner tax credit had to be actual owners (i.e., on the title) for the couple to be eligible for the credit.  We spoke to an IRS representative last week about that issue, and he stated (as we had hoped) that ownership would be imputed from the titled spouse to the un-titled spouse, and that a married couple who had lived in the home that one of the spouses owned for at least five consecutive years out of the last eight (and otherwise qualified for the tax credit) would be eligible.

I got further confirmation on that issue today from a Ms. Burchette, ID # 0246491 of the IRS hotline, who actually indicated that the IRS has released an internal advisory (probably in response to our raising of this issue last week) stating the following: “A married couple are both considered owners of the home even if only one spouse is a titled owner when both have been residing in it.”  So although that advisory has not been published, the IRS is using it internally, confirming the information we put out last week.

But the reason I was on the phone today with the IRS was that we had a new series of related questions come up that in our Questions section, from multiple readers who were concerned about what happens if the couple has lived in the home for a long time together, and one of them is on the title, but they were only recently married:

  • From Matt: Wife and I moved into our current home 5 1/2 years ago (fall of 04)and has been our only principle residence in that time period. When we bought the house in 04 it was in my name only. We married in January of 2008 and refinanced adding my wife’s name to the title in December 2008. We have a sales contract currently in place and are closing in June. I would like to think we meet all the criteria as we have both lived in this house for five years, but would like your opinion.
  • From Katie: My husband bought a house in 2003 before we were married. I had never purchased a home. I lived there for 5 years, 4 of which we were married before we bought a new house together in mid-Nov 2009. Does your recent clarification, mean that we specifically had to have been married for 5 years as well to qualify?
  • From K: My husband and I have lived in the same home for five years. He is the sole owner of the home. Marraige according to the IRS imputes ownership to me. My question is: does the ownership imputed to me run from the date of purchase or the date of marriage? We lived together in the home for the first year while engaged.

In other words, will the IRS impute ownership to a non-title spouse where the spouse has lived in the home for at least five consecutive years out of the last eight that the other spouse owned, but where the couple was not married during that whole time? You could imagine a situation where the IRS will only “impute” ownership during the time that the couple was married, and bar married couples from claiming the credit where only one spouse was on title, and the couple was not BOTH married AND living in that home for the requisite five year period.

Fortunately, the answer seems to be that such couples will in fact be eligible for the Home Buyer Tax Credit. According to Ms. Burchette, the key fact is that they must have both lived in that home for five consecutive years.  If they did that, and one of them owned the home, the IRS will consider the ownership to be imputed to the non-titled spouse so long as they are CURRENTLY married.  They do NOT need to be married for the entire time of their ownership.

Obviously, this is good news.  It’s become fairly common for couples to live together before they get married, and it’s not difficult to imagine situations where couples get married after one spouse has purchased a home that they both lived in.  So we’re glad that the IRS is taking a common-sense approach to this issue.

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Posted in Home Buyer Tax Credit, IRS, Long-Time Homeowners, Marriage Penalty, Married Couples

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More Momentum on the Bill to Change the Marriage Penalty in the Home Buyer Tax Credit

Posted on April 21, 2010 | 6 Comments

As part of our general campaign to end the Marriage Penalty in the Home Buyer Tax Credit, we were interviewed last week by a reporter from the National Journal about the issue.  He wrote up an extensive piece about the issue, which unfortunately was unfortunately behind a subscriber wall when it initially came out.  But it’s live now, and you can read it here:

In fact, we’ve seen a bit of a spike in the traffic on the site this week, and a spike in the Questions section from people asking about the Marriage Penalty, so we think that a lot of people are just discovering the problem.

The funny part about it is that the reporter only discovered the issue when he was getting ready to file his taxes, and realized that he was not able to claim the credit because of the marriage penalty.  I guess what we need now is for someone related to an important Senator to discover the same thing….

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For every clarification, more confusion: more on marriage and the Home Buyer Tax Credit

Posted on April 19, 2010 | 7 Comments

Okay, we confirmed last week that the IRS had finally clarified that there is no “Marriage Penalty”   for couples where one spouse is the titled owner of the property but the other spouse has lived in the home for the requisite five consecutive years out of eight.  (If you are already confused, you should check out our coverage of the Marriage Penalty in the Home Buyer Tax Credit here.)

But given the new surge of questions on the Questions section of the blog, we didn’t clear enough up.  The new question of the week is this: if the IRS will “impute” ownership of the main home from the titled spouse to the untitled spouse, to allow both spouses to qualify as “long-time homeowners”, what happens if the couple wasn’t actually married during the entire time that they lived in the home?

That is, let’s say that we have a couple Harry and Wendy.  Wendy bought a home for herself in 2000, met Harry in 2001, Harry moved in with Wendy in 2003, and they’ve lived together in that home since 2003. If they got married that year, the IRS has now confirmed that they would be eligible for the tax credit even though Harry would not be on the title and not technically a “home owner,” because his wife’s ownership would be imputed to him.  Conversely, if they were never got married, they’d be eligible for a Home Buyer Tax Credit (she’d be eligible as a long-time homeowner, he’d be eligible as a first-time home buyer). 

But let’s say that after all those years together, they made it official last year, and got married summer 2009.  Uh oh. Are they still eligible?  Literally speaking, they would not be, because she qualifies for one type of credit and he qualifies for another type of credit, which is the classic Home Buyer Tax Credit Marriage Penalty problem.  But now the question becomes whether that “imputed ownership” issue will allow Harry to qualify as a long-time homeowner because (1) he lived in the house for all those years, and (2) he is now married to the person who owned it all that time.

We don’t know the answer to this question, but we’ll try to find out.  On the one hand, the IRS has interpreted all these Home Buyer Tax Credit requirements very literally.  On the other hand, it does not seem like the IRS cares so much about the length of marriage, but simply about whether you’re married right now or not.  So it’s up in the air.  We’ll try to find out.

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Posted in First-Time Home Buyers, Home Buyer Tax Credit, IRS, Long-Time Homeowners, Marriage Penalty, Married Couples

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There is no “Fourth Type” of Marriage Penalty: Confirmation from the IRS that an untitled spouse qualifies as an “owner” for the long-time homeowner credit

Posted on April 13, 2010 | 22 Comments

We finally got confirmation from the IRS about the Fourth Type of marriage penalty that we’ve discussed on this blog.  I just had a conversation with a Mr. Schriber from the IRS, ID #0571682, who has confirmed for me the following: if a married couple has lived in a home for five consecutive years out of the last eight, but only one spouse is on the title to the home, the untitled spouse qualifies as an “owner” for purposes of satisfying the ownership history requirements of the long-time homeowner home buyer tax credit.

This is very good news.  We’ve gotten probably a dozen questions on the Questions section of the blog from people who are in this situation, which makes sense given how likely it is that a couple would get married after one spouse already owns a home, and then live in that home for a long period of time.  Although the legislation literally requires both spouses to be owners of the property, the IRS imputes ownership from one spouse to the other, which is something we speculated about when we initially discussed this issue.

We will be updating the various blog posts about this issue, and trying to find all the questions about this issue so we can let people know the good news.  That said, nothing about this changes the other three types of Marriage Penalties, which prevent a married couple from qualifying for the tax credit if one spouse is ineligible, if the spouses are eligible for different types of credits, or where both spouses are long-time homeowners but for different residences.  To change that, we’re going to need Congress to pass the legislation drafted by Congressman Engel.

My thanks to Mr. Schriber for clarifying this issue for us.

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Posted in First-Time Home Buyers, Home Buyer Tax Credit, IRS, Long-Time Homeowners, Marriage Penalty, Married Couples

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No April Fools Joke: Only 30 days left to get into contract and claim the Home Buyer Tax Credit

Posted on April 1, 2010 | 1 Comment

Okay, so this is now the home stretch — 30 days left to get into contract to claim the Home Buyer Tax Credit. If you’ve not already done so, you should take our Eligibility Test to see if you qualify for the credit.

And if you do qualify, and want to claim the credit, you need to make home buying a priority in the next month. We would be shocked if the tax credit were extended again, so don’t sit back and hope for a “snow day.”

How can you get into contract in one month?

  • If you’re not already working with a really good real estate agent, then find one today.  How do you find one?  Do some research: look online, call your friends, ask your colleagues.  If none of that works, and you want us to hook you up with someone great (and accountable to us) in your local area, let us know.
  • Make sure the agent knows you need to be in contract by April 30th, so your agent knows your priorities.
  • Contact a mortgage person and get prequalified for a loan amount.
  • If you’re in an attorney state, call an attorney and hire one TODAY.  Don’t wait until you found your dream house, get your attorney on call for you so that when the seller prepares a contract, your attorney can turn it around in 24 hours.
  • Clear your weekends — you’re going to be visiting open houses and going out with your agent and doing all real estate stuff this month.

Can you get into contract from a standing start in one month?  Yes, absolutely.  Every agent I know has a story about someone who went from “hey, honey, let’s go look at some open houses today, as a lark” to “where do I sign” within two weeks.  So it’s not too late.  But home buying has to be your priority for the next month.

Good luck, and happy April Fool’s Day!

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The Income Limitations in the Home Buyer Tax Credit

Posted on March 22, 2010 | Leave a comment

We get a number of inquiries on our Questions section about the income limitations in the Home Buyer Tax Credit. People are still a little confused about the “new” income limitations, even though they now go back over four months. To help people through it, we put together a video about the income limitations and how they apply, something that might be helpful as people are getting ready to file their tax returns in a few weeks.

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Posted in First-Time Home Buyers, Home Buyer Tax Credit, Long-Time Homeowners, Video

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The Home Stretch: 50 Days Left to Claim the Home Buyer Tax Credit — And Seven Ways to Make Sure You Meet Your Deadlines

Posted on March 12, 2010 | 5 Comments

As you can see on our countdown on HomeBuyerTaxCredit.com, we have only 50 days left for buyers to get into contract and claim the Home Buyer Tax Credit for their purchase. That’s still a lot of time, even enough for people who haven’t started looking yet, but remember that it does take time to get through the contract process even after you find the home you want to buy.

Our new video — Seven Ways to Make Sure You Meet Your Home Buyer Tax Credit Deadlines — gives you some guidance on how to ensure that you don’t miss the April 30 deadline. Here are the highlights:

The Deadlines
As you might know, the Home Buyer Tax Credit has two principal deadlines:

· You have to be in contract by April 30th, 2010; and
· You have to be closed by June 30th, 2010.

These are hard deadlines. It’s not like high school when you can go to your teacher and ask for an extension because you were sick over the weekend. The government is not likely to issue another extension of the tax credit, and the IRS has been extremely strict about enforcing the deadlines.

Remember that getting into contract on a home can take a lot of time, that you have to get all these things done:
· Find the right real estate agent.
· Find the right mortgage officer
· Get pre-qualified for a loan amount.
· Look at lots of homes online.
· Look at lots of homes in person.
· Find the right home, and make an offer.
· Negotiate the price and terms.
· Arrange and hold an inspection.
· Deal with the inspection results.
· Hire an attorney to review contracts, if you are in an attorney state
· Review contracts with attorney, sign and return.

And then even if you’re in contract by April 30th, you’re not home free, because you still have to be closed by June 30th, which gives you only 60 more days to get through the title and financing process. And those can take a while.

Moreover, I fully expect that as we get closer to these deadlines, we’re going to see business activity explode. If you wait too long, you might have trouble scheduling an inspection when the inspectors are being hammered with urgent calls from people in the same position. A lot of people are going to be scrambling to get into contract in the last two weeks of April, and closed in the last two weeks of June. Try not to be part of that mob.

So here are 7 Tips for Meeting Your Home Buyer Tax Credit Deadline:

Continue reading →

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Posted in Deadlines, First-Time Home Buyers, Home Buyer Tax Credit, Long-Time Homeowners, Video

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