Picking holes in $6,500 tax credit
Some doubt incentive is enough to motivate homeowners
By Tom Kelly, Friday, December 11, 2009.
When President Obama signed into law the Worker, Homeownership and Business Assistance Act of 2009, it extended the $8,000 first-time homebuyer tax credit as well as offering a new tax credit up to $6,500 for current homeowners who buy a new primary residence.
The law also extended the strongest driving force in housing today. How big of a force is it? According to the Internal Revenue Service, more than 1.5 million claims were processed from individuals and families who have purchased a home between January and September 2009, and the National Association of Realtors estimates that some 350,000 of these buyers would not have purchased the home without the tax credit.
In addition, analysts say that more than two-thirds of all current homeowners and nearly all first-time buyers will be eligible for the credit extension.
While there's no doubt that the first-time component will continue to be popular, how many existing homeowners who qualify for the new $6,500 credit will actually use it?
Before we present some basic projections from a professional survey, let's consider some realistic domestic timeframes. Here are the important dates to remember:
Nov. 7, 2009: For current homeowners, the home must be purchased on or after Nov. 7, 2009, to qualify for the credit.
April 30, 2010: Purchase and sales agreements must be dated by all parties with a date on or before Friday, April 30.
June 30, 2010: Purchases must close on or before Wednesday, June 30.
The big question for current homeowners is if the window is wide enough to even consider the incentive. Would you, especially if you had not considered selling your home, now uproot your family for $6,500? Would you even consider the anxiety of marketing your home during the holidays or gambling that an acceptable offer would be signed all around by April 30? ...CONTINUED
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Submitted by Joe Loomer on December 11, 2009 - 5:37am.
Good points, Tom.
I would mention that lost in your post is the reasons why people move in the first place. The $6,500 may very well be the incentive some people need to get rolling if their existing home is too small for the number of kids they now have. Or on the other end of the spectrum -"empty nesters" and retirees looking for that resort or lifestyle center property for the golden years.
Augusta GA Homes
Joe Loomer, USN Ret.
Assistant Team Leader
Keller Williams Realty Augusta Partners
Submitted by Emily Medvec on December 11, 2009 - 5:57am.
Congress continues to believe what separates us from animals in our decision making process is tax incentives rather than the combination of emotional and rational variables which make up how we decide to buy a home.
Your excellent analysis reminded me how much of what we think is driven by emotions and how important it is to understand the details when consulting our real estate clients.
Emily Medvec, Realtor
Santa Fe Properties
1000 Paseo de Peralta
Santa Fe, NM 87501
Best Anytime Cell 505.660.4541
www.emilymedvec.com
www.buysantafehomes.com
Submitted by John Rakoci on December 11, 2009 - 5:58am.
It seems unlikely $6500 would be much incentive for a primary home purchase. It would be nearly impossible to sell a home, then find and buy another in that time frame. Most people that can afford to buy that new primary and retain the old home would not be swayed by $6500. It sounded good until the restrictions became known. Just a political ploy...
Submitted by Brenda Knight on December 11, 2009 - 6:52am.
Great article. I have wondered myself how many of my clients who currently own a home will be motivated to do something.
The biggest obstacle is still their lack of understanding of this market. It's not possible to get a 2007 price for your home and then buy a home at a 2009 price. Few are willing or can set the price of their current residence to sell in this market, while all are anxious to take advantage of all the deals.
Brenda Knight
Diamond Dwellings Realty
Atlanta Metro Area
Submitted by Robert T. Boyer, Ph.D. on December 11, 2009 - 7:50am.
Nicely written, but the viewpoint the article takes is in getting someone from ground-zero to fully in action.
The reality is that those most affected will be those ALREADY leaning in that direction. E.g., it is the getting people off the fence.
The only question in my mind is whether or not it gets more people off the fence than rewards those who were going to take that action anyway.
BTW, I don't believe it says existing homeowners need to sell their home, so then it is possible that some people will take this opportunity to move-up and own their first rental unit.
Robert T. Boyer, Ph.D.
Co-Founder - http://www.FinestExpert.com
VP http://www.AmericasFinestRealEstate.com
Submitted by Christina Vance on December 11, 2009 - 10:00am.
My question is, if I qualify for the repeat buyers credit and I was just married in May and my new husband doesn't qualify, is there any way that I can qualify for the credit if I file married filing separate? I have heard both yes and no answers, so I'm not sure what to think. It's impossible to get clarification from the IRS.
Submitted by William Metzker on December 12, 2009 - 1:41pm.
Christina--get divorced and re-marry after June 2010?