How to Make the Most of the Tax Credit
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Time is running out for the Real Estate Tax Credit! April 30, 2010 is the deadline to have your buyers under contract!!
Are You Making the Most of the Real Estate Tax Credit?
Most of the agents I work with are focusing on motivating first time homebuyers to use the up to $8000 Tax Credit. But, there are other uses for it that could help you get buyers motivated. This is the time to think creatively to make the most of the motivating power of the tax credit.
Who Could Take Advantage of the Real Estate Tax Credit?
Buyers Who are Downsizing - If a buyer has lived in one home for five consecutive years out of the last eight, they are eligible for a tax credit of up to $6500 if they are looking at homes that cost up to $800,000. And, there is no provision stating that the new home must cost more than the home being sold or vacated. Any of your potential buyers who are downsizing could well meet that criteria.
Buyers Who Want to Keep Their Existing Home – The buyer’s existing home doesn’t have to be sold – it can be sold or vacated. Who might fit into this category? Perhaps a retiree who wants to buy a retirement property to move into in a warmer climate, but who wants to maintain their original home for trips back to their hometown.
How about a buyer who is being transferred, but who anticipates returning to their home town? This buyer may choose to keep their original home and rent it in anticipation of moving back in. As long as they plan to live in their new home for at least three years, they could qualify for the $6500 tax credit.
Buyers Who Have Been Transferred Often – You might run into a buyer who has been moving around on a series of relatively short assignments, and has chosen not to purchase in each city they’ve resided in. This buyer may not be a first time buyer, but if they haven’t owned a home in the past three years, they could qualify for the $8000 tax credit.
Any Buyer Who Meets the Income and Home Price Criteria – Actually, any buyer who has lived in one home for five consecutive years out of the last eight could quality for the tax credit. Here’s what that means:
- If your buyer is single making up to $125,000 or married with a combined income of $225,000 AND
- If your buyer is looking at homes that cost up to $800,000 AND
- If your buyer has owned and lived in one home for five consecutive years out of the last eight THEN
- They’re probably going to qualify for the $6500 tax credit
How many of your buyers meet this criteria? How many of them are you talking to about the tax credit?
Think about it. You may have a very potent tool to get buyers motivated and you’re just not using it.
Here’s NAR’s breakdown of the Qualifications for the Real Estate Tax Credit for further information.
NOTE: Thanks to Betty Byrnes who markets Kokomo Homes for Sale for pointing out something that was not clear in this post. In order for a home to qualify, it must be up to $800,000. However, the tax credit for existing home owners is up to $6500 and for those buyers who qualify as “first time home buyers”, the credit is up to $8000. Thanks again, Betty!
Also, I’ve decided to stop calling this the $8000 Tax Credit. I think calling it the Real Estate Tax Credit will help everyone focus on the expanded definition!
