This morning, my inbox has received several notifications about the formal extension of the Homebuyer Tax Credit which will provide financial assistance to many New Home Buyers and Existing Homeowners who are considering the purchase of their next home. Later in the day, a conversation with a client underscored our need to make sure that as real estate professionals, we provide accurate information from the Federal Government about this tax credit. Here’s the question:
Question: If an existing homeowner sells a home and qualifies to utilize the extended Tax Credit, is the date on the contract OR the settlement closing date the one which is used to determine qualifying eligibility?
I spoke with 2 mortgage officers, both of whom were not certain about the answer. Than I visited the Federal Tax Credit information site (which has not yet been updated to reflect the news of the morning 11/06/09) and also read the FAQ from our State Association & the National Association of Realtors. Why was this necessary? Well, the answer in part my be the result of changes which are happening very rapidly and the fact that sometimes there is a lack of clarity initially. Here’s the response from the National Association of Realtors (NAR) which was obtained from my local and state Board.
Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.
This is just on example of the types of questions which consumers will be asking. Do you know where to send them to get accurate information? The Michigan Association of Realtors has been proactive in getting information out about this program. Other detailed questions about the change in the provisions for the Tax Credit can be found here.