Hawaii Real Estate starts Here!

As a continuation of the first time home buyer tax credit, legislators have passed a bill that extends the first time home buyer tax credit and also expands the credit to other buyers that are selling their home and buying a new home or existing home.

The new first time home buyer tax credit is up to $8000 for buyers until April 30, 2010.  Current home owners who sell their current home and buy a new or existing home as a replacement can get up to a $6500 tax credit.

More from the National Association of Realtors:

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000.

The maximum allowable credit for current homeowners is $6,500.

How is a Buyer’s Credit Amount Determined?

Each home buyer’s tax credit is determined by tow additional factors:

1. The price of the home.
2. The buyer’s income.

Price

Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income

Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009,  single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

A new bill before the Senate would allow a credit to home Buyers of up to 10% of the purchase price, up to $15,000 maximum.  This is based on the perceived success of the $8000 first time home buyer tax credit, that is currently in effect until the end of November.  The $8000 tax credit has been less successful, because of the many restrictions that come along with it such as the income requirement.  But, $15,000 to home buyers could definitely stimulate the economy through real estate.  If you look at what that would mean on Oahu with our median home sale price of $500,000 ( latest number for May 2009), then that equates to a 3% credit of the purchase.

As I have said in a previous blog posting, there has been an uptick in the number of homes that have sold in the month of May in the Oahu real estate market.  From January, we are up approximately 46% in the number of homes sold.  That can be construed as being partially attributable to the tax credit, as well as the change in the FHA lending requirements and general liquidity coming back in to the lending markets.

This could also stimulate the lagging move-up buyers that want to move up into a more expensive home or better neighborhood.  Currently, the vast majority of these buyers have just been waiting on the sidelines.  From my own experience, there are more Buyers out there and this could provide the motivation they need to jump into the market.