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$8000 First-Time Home Buyer Tax Credit Extended!

October 28, 2009 by Chris Record  
Filed under Real Estate Investing, Recent Articles

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First-Time Home Buyers Tax CreditUPDATE: 11/6/09 – President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes. (click here to read more…)

11/5/09 – House lawmakers passed the bill today in a 403-12 vote, and now the bill goes to President Obama who is expected to sign. (click here to read more…)

Great news came across the newswire today about the First-Time home buyers tax credit.  It looks like Senators have agreed in principle to extend the credit although it still has to be inserted into a bill & voted on by the house.  Headlines across the nation are slightly confusing on whether or not this will go through, but many feel that it will surely pass.

Here is what USA Today had to say about today’s announcements:

“Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.

The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.”

Based on today’s compromise it looks like the income limit would also be raised to $125,000 a year for individuals and $225,000 for married couples, up from the current income limits of $75,000 and $150,000, respectively.  This means that more people will be in a position to capitalize on this incentive, which hopefully will fuel more home sales.

Many sophisticated real estate investors are excited about this potential extension because they are able to work with people facing foreclosure to create a win-win-win scenario where they can help purchase their home without them getting a foreclosure attached to their credit.  Investors can then fix up the home and sell it at a discount to first time home buyers who can leverage this extended tax credit.  Everybody wins and neighborhoods are being improved at the same time.

Are you glad that Senate leaders compromised to extend this tax-credit or do you think that it will hurt new and existing home sales?  I would love to hear your feedback in the comments below!

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  • I hope this gets final approval soon. I have advised my buyers not to rush into decisions because the deadline is approaching. I have advised that they should buy because they found a house that they must have without any pressure of a deadline.

    The tax credit has worked beyond initial expectaions. I know of a few real estate attorneys who are now planning to cancel any Thanksgiving plans and they will be working straight through because their deals all state "must close befor Nov 30th." This new tax credit will jump start the whole segment of the economy that is affected by home purchases: Realtors, Home Inspection Services, Mortgage Brokers and Lenders, Attorneys, Title Companies, Appraisers, Moving Services, and Home Improvement Services, Manufactureres of Housewares, and Home Improvement Contractors. It's the rebound "Trickle Up" effect. Whether we approve or not, our economy is based upon housing and automotive. This credit will not only create a hot first time buyer market, but a move -up market. A continuation of this program can only point the economy toward improvement and continuation of the Amercian Dream. Let's hope that Congress takes this serious enough to act upon before they take another recess.
  • Cathy Matthews
    Yes I am very excited. Hopefully it all goes thru, many people stand to be helped thru this.
  • kenm1110
    I think that it will havean overall positive effect although it might not show unfortunately until spring. seasonal weather conditions and the holiday season have their effects on the market and with the knowledge that the program runs until spring I am not sure if it will light the fire under buyers in the more weather effected markets. I would have loved forit to be extended to year end first and then again in February.
  • Sounds like a good thing to me... in our experience, the existing credit was use by some 60% of our buyers... that is a huge percentage of first time buyers. We have not seen so many move up sales lately, so this might help people to move up... increasing sales even more than the previous credit... we shall see.
  • Just to clarify, the original title of this post was probably a little misleading, as only Senators have come to the compromise on this extension so far. There are several news sources that are touting it as a done deal, but the reality is that it still has to go through the House and the President.

    Here are a couple of prominent sources for some additional information:

    http://www.usatoday.com/money/economy/housing/2...

    http://www.boston.com/business/articles/2009/10...

    http://www.sfgate.com/cgi-bin/blogs/pender/deta...

    http://online.wsj.com/article/SB125678511901015...

    http://www.washingtonpost.com/wp-dyn/content/ar...

    http://www.cnn.com/2009/POLITICS/10/28/senate.h...
  • I think this extension is GREAT news for 1st time homebuyers. Many of them are buying nice residential properties that are in an early phase of foreclosure. The seller is in financial distress and behind on payments. Maybe due to a layoff, divorce, or mortgage that adjusted. The reality is that many buyers out there have a ratified contract thats pending aproval for a short sale. The short sales process is anything but short---meaning it can be a lengthy process, spanning months. A lot of those loans were originated as 80/20 and thus there are two lenders involved and the bank in the second position is negotiating back and forth to limit their losses, thus delaying the process. Meaning that if the homebuyer has a deadline of November 30, 2009 to use the tax credit and cannot get the bank to approve the short sale with adequate time to close, then they have to back out and walk away from the home after months of waiting. This extension gives them more time. In this market environment, that is a good thing. This is a consumer scenario, but serves real estate investors just as well. Even though we are more educated and assertive. I have seen banks stall and misplace files even with all cash buyers, so its crazy! You would thnk they would be motivated to move non-performing assets off their books, but I imagine the individuals responsible for the daily admin tasks are overwhelmed by the volume of work. Again, this extension buys everyone more time.
  • Great points Christina! Thanks for stopping by and adding so much value to this post. I agree that banks are definitely overwhelmed with the influx of foreclosures that have hit their books, which is why I would love to see some sophisticated real estate investors step up and negotiate with the banks to get some great deals and take these properties off the books. 2010 will be a year of great transfer of wealth...
  • E Chicago
    The senate agreed to it... but the house still has to agree. Correct? So the tax credit hasn't "officially" been extended until they do so. Do I understand that right?
  • Yes, I updated the title of the post to reflect it. I wrote the post quickly and was referencing a similar title on a news site. However, take a look at some of the recent news releases on Google News and you will see that most believe this is locked in. What do you think will happen?
  • Great blog Chris, although the title HAS BEEN EXTENDED is misleading. You should have erred on the side of caution (as did the AP) & phrased it Senators have agreed in principle to extend. Still has to be inserted into a bill & voted on.
  • Yes I agree Eric. I knew that when I posted the article, but seeing as how several major news sources were writing as if it had already been extended I thought I would be clear.

    I updated the title to say: "$8000 First-Time Home Buyer Tax Credit Agreed To Be Extended!". Hopefully this is less misleading. Thanks for the accountability. I would love to read more of your comments on my blog!
  • DianaBrunner
    Chris thank you so much for the BREAKING NEWS! I can officially say that I "heard it here 1st!".

    The extension AND expansion of the tax credit will most certainly help our current market conditions. I can't imagine why anyone would think it wouldn't. As a real estate investor as well as a real estate broker, I saw a tremendous positive impact on my business this past year in 2009 due to the credit. However, as the fall season lingered closer, the buyer pool dwindled down dramatically as people thought they no longer had enough of time to find and close on the house they wanted.

    I am even more excited that they raised the income limits and opened it up to previous homeowner's as well as 1st timers!

    I am looking forward to a GREAT spring season in 2010 now that this has been extended. The only way it could have gotten any better is if they would have extended through to the end of the year.! Oh well, I guess beggars can't be choosers!
  • Diana, I love your optimistic positive attitude! Thanks for commenting with your picture as well. I love to see a face along with a comment :) I would have to say that I agree with you that this can have a huge positive impact on our real estate market and looks like a win-win for everyone involved. Now that people will learn that they have more time to identify a home to use for the tax credit, I think that we will see a surge in first time homebuyers hit the market. The increased incomes simply makes this a more realistic option for more people than ever before. Let's spread the word and capitalize on the "Perfect Storm" of opportunity in 2010!
  • Name
    Chris, my understanding is that this is not yet official. It still has to go through the House and the President. What source is your information from?
  • I sourced USA Today, and most prominent resources suggest that it will surely go through. And that if it doesn't, that it will be juiced up with even more incentives and then put back through. I did mention that the vote on the measure could be delayed until next week, so we will see what happens. I will admit that I wrote the title as if it were already voted on and accepted so that I could initiate some debate over the topic, but I would be wiling to be money that it's in the bag. Also, many major new sources are already writing as if this is a done deal... http://www.usatoday.com/money/economy/housing/2...
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