When my daughter began shopping for her first home last year I was happy as her mother/real estate advisor to let her know that there was a great new $7,500 federal tax credit for first time buyers. Naturally, I began to research the program to assure that she was getting the most out of it. Was it too good to be true or was Uncle Sam actually lending a genuine interest in the millions of first-time home buyers? As it turns out, there is a tax credit for 10% of the purchase price up to $7,500, but unfortunately, it was not enough incentive to pole vault her or others into homeownership. The truth is, it's a trick. It isn't a true "tax credit". It's an interest free loan that you have to pay back to the IRS, $500/year for 15 years. Boy, is that some razzle dazzle government marketing. It reminds me of $19.99 pricing, attempting to make you feel like you are getting more then you actually are.
Another stumbling point is the maximum income of $75,000 for a single person and $150,000 for a married couple. In areas like Key West you have to make more then $75,000 to qualify for an average residence.
The final problem is you get no help at the time you are trying to accumulate enough money for a down payment (which now a days everyone has to have) and closing costs but you do not realize the credit until you file your tax return the following April 15th.
Now, before you get too discouraged, let me tell you the good news. The new economic stimulus bill is to include an $8,000 tax credit that would be available to first time home buyers, but a first time buyer is considered any one who has not owned their own home for the last 3 years and that does not include a rental property or a vacation home. This credit will apply to any purchase from January 1, 2009 until December 31, 2009 and a purchase in 2009 can be applied to you 2008 tax return. Because of this you could actually get the money fairly soon after closing if you buy now and send in your 2008 tax return right away. Even if you can't arrange to get the credit within a short time of closing, how great is that to get the bucks to fix up the new place? So many of the foreclosed and short sale properties are really a mess. The absolute best part of this new bill is that it does not have to be paid back! This will really make it work, but step back real estate speculators. You won't be able to do a quick flip here. If you don't occupy the residence for the first 3 years you pay back the credit. Do not pass go and do not collect $200.
I am really excited about this. I have so many buyers who will love to get this special help. It's about time we have something to get us out of our beat up real estate market. Not to mention the amazing help to our beat up real estate agents! It's time for a change.
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