For buyers searching for their next home, we are in the final stretch to take advantage of the Home Buyer Tax Credit. To qualify for this credit, the contract must be signed by April 30th and close by June 30th or this year. It’s important to understand that an offer made by April 30th does not qualify. The offer must be accepted and signed off on (creating an binding sales contract) by April 30th.
What is the Tax Credit? There are two types:
1. First Time Home Buyers – This credit applies to buyers of a principal residence and have not purchased a property in the last 3 years. The credit is equal to 10% of the purchase price up to a maximum of $8,000.
2. Repeat Buyers – This credit applies to home buyers who has a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. This credit is equal to 10% of the purchase price up to a maximum of $6,500.
Obviously this is a great opportunity for buyers today. There are few questions I’ve been asked about this program that I wanted to touch on:
Q: Will the program be extended?
A: There is no indication at this time that the Federal Government will extend this historic program.
Q: What are my options if I don’t find a property and have a contract by April 30th?
A: First, no one should make a ‘rash decision’ when buying a home. Homes will obviously still be available for sale and the goal is to find the house the meets your lifestyle and financial needs while insuring you get the best financial benefit for your investment. The Tax Credit has been an added ‘bonus’.
Q: What will this mean if my house is listed for sale?
A: Some sellers have expressed concern that the ending of the tax credit will impact the list price and/or length of time to sell. This concern comes from speculation that the growing demand we’ve seen lately will decline or disappear all together. First, it is difficult to say exactly how much of a motivator the tax credit has had on the buying decision as of late. I’m sure it has had some impact on buyers who have purchased and we may see some decline in demand, but time will tell. Keep in mind that buying a home is a big decision for someone and one that people do not take lightly. They consider a great number of factors when making the buying decision. Selling a home is a process (the formula I use is ‘Priced Right + Great Presentation to the Widest Possible Buyer Audience =>Showing => Offers and Negotiation => Sold’) and you ‘stay the course’ in the sales process.
Q: What will this mean for the overall market?
A: Local real estate markets are all different and perform vastly different based upon a variety of local economic factors. We have been fortunate to see a significant increase in demand and a reduction in the number of homes for sale which in turn has slowed the decline in median sales prices significantly from the double-digit declines we were seeing over the last few years. Demand and levels of inventory are the most important factors to continuing on the ‘stabilization’ path and the ‘road’ back to more normal market performances. This does not mean a V-shaped recovery of median prices. We look for a return to the normal (and healthy) single digit appreciations year to year.
All in all, the ending of the tax credit will likely have an impact on real estate markets. The extent of which is yet to be seen. The Palm Coast and Flagler County area has the benefit of being a relocation area which many are attracted to. We are a growing area and I personally do not see that changing. We are somewhat dependent on other markets and their performance (the ability for outsiders to buy here that are dependent on selling elsewhere), and again time will tell how that factor plays out. For me it’s time to ‘stay the course’.