Buying - Walnut, Pomona, Rancho Cucamonga - California Real Estate Homes and Properties

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Exciting News for Home Buyers

New Home Buyers Can Receive up to $7,500 Tax Credit

To encourage housing sales, Congress recently enacted a law which provides a federal tax credit for many home buyers.  To qualify for this tax credit the buyer(s) must not have owned a house during the past three years, and purchase a home between April 9, 2008 to June 30, 2009.  The tax credit for these home buyers is up to $7,500 for a married couple, $3,750 for single tax filers; the credit can be claimed for up to 10 percent of the purchase price of the property, up to a maximum of $7,500. 

If the buyer(s’) adjusted gross income exceeds $150,000 per couple, $75,000 for singes, the credit maximum begins to phase down in increments. The credit cannot be claimed: by nonresident aliens, if the property is financed using a state or local housing agency tax-exempt bond mortgage, or the buyer(s) do not plan to use the house as their principal residence. 

To illustrate…if you’re an eligible buyer of a home this year and you owe the IRS $4,000 on your 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund. The new home purchase tax credit is what the government calls refundable: If your tax bill is less than the credit amount, you get the difference back from the Treasury.

Whoever utilizes this tax credit is required to repay the credit over an extended period of years. Beginning in the second tax year after purchase and continuing for up to 15 years, the taxpayer(s) are expected to make pro-rata repayments to the government. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year. If the home is sold before the end of the repayment period, and there is no gain on the sale, no remaining tax credits are expected to be paid back. If there is a net gain, the payback will not exceed the amount of the gain. This tax credit works very much like an interest-free loan for up to $7,500; you pay the principal back in increments over time, but there’s no interest charged to the homeowner.

To learn more about this exciting new tax credit program go to www.federalhousingtaxcredit.com.

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As we all know by now, many of the homes presently on the market are being sold because the homeowners can no longer pay their mortgage. These homes fall in one of two categories; "short sales" and "foreclosures," it is important for buyers to understand the difference between the two as it greatly affects sales transactions.

 A "short sale" or "short pay" is a sale where the homeowner still owns the home, but the home is not worth the amount of the mortgage. In a "short sale" the seller will not receive any money from the sale of their home. They want to sell but in order to do so they must receive approval from their lender or lenders to take less than what is owed. In this situation it is the lender that decides what price the property will sell for, not the homeowner.  This can prove quite frustrating; the "short sale" process can take anywhere between two to nine months and may never close. First, the "decision maker" for the lender must be found, then he or she will determine if the homeowner truly cannot afford the  mortgage, what the property is worth and whether the proposed "short" sales price (under the amount of the mortgage) makes sense for the lender to accept.  The process is burdensome and lengthy, often times a proposed buyer has to wait so long for an answer from the lender that their loan "lock-in" rate expires. Given all of the problems inherent in short sales, many have come to call them "maybe sales."   

A "foreclosure" is completely different from a "short sale." A foreclosure property is owned by a Bank or lending institution. It is also referred to as an "REO" or "Bank-owned property" The bank is putting the property up for sale after it has established a price it wants for the property.  A sale can be agreed upon quickly.  Banks and lending institutions are motivated sellers, they do not want to keep the property, they want to sell and sell fast. Foreclosures create great opportunities for buyers; oftentimes more so than short sales as the buying process is streamlined.