One feature of the extension of the first-time homebuyer tax credit is expanding it to so-called move up buyers. Many seem to refer to it that way. For those who have owned and lived in a home for five out of the last eight years, they are eligible for a tax credit of up to $6,500 when they buy a home in the next few months. (Don't ask me to explain the logic of five years and not four years.)
But as I read it, there is nothing requiring them to sell a home. And there is nothing requiring them to buy a more expensive home. So they could be move up buyers, downsizing buyers, or even buyers who buy another home to live in while they rent out the first home.
But for those who do have a home to sell, their time frames will be challenging. First they need to sell a home during the traditionally cold, slow months of December thru February. Then they need to have their new or replacement home under contract by the end of April and close by the end of June.
Short sales would not work here, because the short seller would not be a buyer a month later. So if one is going to sell the home they would either need to have equity in the home, or have enough cash to bring to closing to cover an equity shortfall.
We can think that April is months into the future. But for many move-up buyers, those months are essential to get one home sold and closed and another home bought and closed within set time frames. Those buyers need to act soon to increase their chance of getting this done. So as agents, we have some communicating to do. Many are not aware of the so-called move up provisions. And of course we need to encourage anybody who wants to take advantage of these tax credits to consult with a tax professional.
With low interest rates and limited-time tax credits in the picture, there could be some extra activity this winter.
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