Published: Thursday, December 10, 2009
The federal tax credit has been extended to April, 2010, including an expanded benefit to existing home owners who sell their homes and then repurchase a new primary residence valued at $800,000 or less. This could be the perfect opportunity for buyers who wanted to cash in on home auction bargains but were fearful of lower resales on their existing homes. While first time home buyers still can claim $8,000 of tax credit, existing home owners can claim $6,500 if they sell their home and repurchase another primary residence. This extra tax credit might persuade some sellers to let go of their homes even if they have seen some price depreciation in recent months.
By buying their new home at a foreclosed home auction, they can more than recoup their investment on their existing home, and claim a $6,500 tax credit in the process! Like the initial home buyer tax credit, there are some strings attached:
• Income limits are $125,000 for individuals and $225,000 for couples
• Buyers who claim the tax credit must remain in their homes for 3 years or they have to repay the tax credit
• Investor owned properties are precluded from participating
This means traditional home buyers have a leg up on investors who look to the real estate auctions and foreclosures listings for great bargains. With fewer tax credits available, investors are sure to pull back, if even slightly, from the market at this time. Lenders will also be looking at available equity, and potential income increases from the tax credits, when underwriting loans. Primary residence buyers will have an advantage there as well.
Foreclosures Market Shifting From Listings to Auctions
The Southern California foreclosures market is shifting from one where agent listings comprised the bulk of all real estate sales to one where foreclosures are declining, particularly in the agent listing marketplace. While lenders still have significant numbers of foreclosures on their books, they are rethinking how they dispose of them, and using agents less than in previous quarters. As a result, buyers can expect to see even more foreclosed home auctions than ever before. If you have been thinking about selling your existing home and moving up to something better, now might be the best time for you to consider buying your next primary residence at home auction. You will get a terrific price on your new home, and claim a $6,500 tax credit on the sale of your existing home. Talk to your tax professional today to find out how you can benefit from buying a foreclosed home at auction.
“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light not our darkness that frightens us. Actually, who are you not to be? You are a child of God. Your playing small doesn’t serve the world. There’s nothing enlightened about shrinking so that other people won’t feel insecure around you. We were born to make manifest the glory of God that is within us.”
- Nelson Mandela