Repayment of the First-Time Home Buyer Credit is contributing to low inventory levels?

Reblogger Shanna Hall
Real Estate Agent with Real Estate Solutions 2002018857

Sondra put togeterhe an interesting blog and I just wanted to make sure my followers were able to see this!  Thinking back- I think all of my buyers are in the clear now;) 

Original content by Sondra Meyer: CO: II100035296

Repayment of the First-Time Home Buyer Credit

 

Many of us have heard about the “low inventory” problem.    This problem is not in the high end/luxury market.    My theory is that the low inventory problem may be related, in part, to concerns related to the repayment of the First Time Home Buyer Credit, which was utilized by many buyers between 2008 and 2010.

 

I’ve talked to homeowners that are not selling because they would not have enough equity to purchase another home after repaying the credit.    

 

Before I go any further, here is the link to the IRS’s website page that discusses repayment of the First Time Home Buyer Credit.    http://www.irs.gov/taxtopics/tc611.html .    

 

Each person’s tax situation is different.  For example if the home owner is/was in the military, different rules may apply.  Therefore, it is important to consult with a qualified Certified Public Accountant about your particular situation. 

 

Basically,

 

If you, the home owner, bought your home in 2008- You are liable for repayment of the credit for a total of 15 years or until you sell your home. 

 

If you bought your home in 2009 or 2010, if you sell your main home to an unrelated person or entity, you repay the credit only up to amount of the gain that you receive.    Of course, gain must be calculated per the IRS's rules.  Seek qualified help. 

Update:  Today I went back onto the IRS website and confirmed 

"You purchased your home in 2009 or 2010

Generally, you must repay the entire credit for the year you sell the home or it is no longer your main home. There are some exceptions to this rule, however, and you do not need to repay the FTHBC for a home you purchased in 2009 or 2010 if it remains your main home for the three years after the purchase."  

There are a few comments below that explain it a little better than I have done here.  

 

Regardless, there are some people that are not selling their homes right now because they purchased would have to repay the credit.

 

It becomes more complicated.

 

The chart below is from the IRS website.  I’ve highlighted some of the relevant statements. 

Repayment Triggers

 IF

AND

THEN

You bought a home in 2008 and received the first-time homebuyer credit

You sell the home to a related party within the next 15 years

You must repay the full amount of the credit, reduced by any amount of the credit that you previously repaid. You must complete Form 5405 and attach it to your federal tax return for the year you sold the home to report that you sold the home and to repay the unpaid balance of the credit.* This is required whether you had a gain or a loss on the property.

You bought the home in 2009 or 2010 and  received the first-time
homebuyer credit

You sell the home to a related party within 36 months of buying the home

You must repay the full amount of the credit. You must complete the Form 5405 and attach it to your federal tax return for the year you sold the home to report that you sold home and to repay the credit*. This is required whether you had a gain or a loss on the property.

You bought your main
home in 2008, 2009 or 2010

The home is destroyed or condemnedand you do not replace it by rebuilding or buying a new main home within two years of the event

You must repay the full amount of the credit. You must complete Form 5405 and attach it to your federal tax return for the year of the destruction or condemnation of the home to report the destruction or condemnation. You must also complete another Form 5405 and attach it to your federal tax return for the year in which the two-year period ends to report that you did not replace your main home within the two-year period and to repay the unpaid balance of the credit.* 

You bought your home in 2008, 2009 or 2010

You convert the home entirely to a business or rental property

You must repay the full amount of the credit. You must complete Form 5405 and attach it to your federal tax return for the year you convert the home to report that you converted the home and to repay the unpaid balance of the credit.*

 

Due to repayment provisions, the First Time Home Buyer Tax Credit's isn't exactly conducive increasing home inventory levels, conversion of homes to income producing property, or to the transfer to family members..... 

Update:  Today I went back onto the IRS website and confirmed 

"You purchased your home in 2009 or 2010

Generally, you must repay the entire credit for the year you sell the home or it is no longer your main home. There are some exceptions to this rule, however, and you do not need to repay the FTHBC for a home you purchased in 2009 or 2010 if it remains your main home for the three years after the purchase."  

There are a few comments below that explain it a little better than I have done here.  

Regardless, there are some people that are not selling their homes right now because they purchased would have to repay the credit.

 

Sincerely,

Sondra Meyer Peterson, CPA 

Certified Public Accountant - Texas
Colorado Horse Property Specialist
 

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Rainmaker
1,381,087
Jeffrey DiMuria 321.223.6253 Waves Realty
Waves Realty - Melbourne, FL
Florida Space Coast Homes

I think low inventory has a bunch of factors...one: fewer new builders, two: as prices increase more potential sellers see the light and hold on thus reducing short sales/foreclosures. Three: People pull cash out of an overheated stock market and pay cash for homes...or gift money to kids for a nice down payment.

May 13, 2014 01:00 AM #1
Rainmaker
4,037,885
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Shanna, great re-blog and had many first time home buyers fit into that category.

May 13, 2014 01:37 AM #2
Rainmaker
3,097,076
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Shanna,  Great information to pass on to those people that were first time home buyers.

May 13, 2014 03:48 AM #3
Rainmaker
1,728,464
Rob Thomas
Prestige Homes of The Tri Cities, Inc. CALL....423-341-6954 - Bristol, TN
Bristol TN-VA & Tri Cities Agent, ABR, GRI, e-Pro

Shanna ....very nice re-blog ....this is very good info for all ....Have a great night in MO!!!!

May 13, 2014 08:25 AM #4
Rainmaker
3,978,739
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

YUP!  I have run into this also.  I have started asking about the re-payment to sellers from that time period. 

May 13, 2014 09:56 AM #5
Rainmaker
2,237,529
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Shanna. I hadn't looked at this as a cause of lower inventory. It wouldn't stop me if I needed to sell, that need would be more important to me.

May 13, 2014 07:47 PM #6
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Rainmaker
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Shanna Hall

I love selling houses!!!St. Louis, MO 314-703-1311
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