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A Little Discrimination in the 2010 Home Buyer Tax Credit?
It’s very late in the game with the 2010 home buyer tax credit, the finish line is only days away. My purpose in mentioning this issue now is so something like this doesn’t happen again. The next time Congress enacts a piece of legislation such as this, there shouldn’t be any discrimination against people because they’re newly married.
My team is working with a home buyer who just discovered he and his wife are not eligible for the 2010 home buyer tax credit. He qualifies for the repeat home buyer tax credit because he’s owned his home for more than 5 years. He married 3 years ago, so his wife does not meet the 5 year rule to qualify. She, of course, is eligible for the first time home buyer tax credit, but he is not.
Here are some questions and answers about this very issue from the National Association Of Home Builders website’s frequently asked questions. In addition, I checked out H.R. 3548, the bill that included the tax credit, (it’s in Section 11), but it really tells you nothing.
For married taxpayers, the law tests the home ownership history of both the home buyer and his/her spouse. That is, both spouses must qualify as long-time residents, with at least five years of principal residency for each.
Does a married couple qualify for any home buyer tax credit in the following situation? Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years.
In this situation, the couple does not qualify for any home buyer tax credit. Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.
Ironically, if they weren’t married, they could qualify:
How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
The buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.
The language is very much the same with regard to the first time buyer tax credit:
- How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
The buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit. - Does a married couple qualify for any home buyer tax credit in the following situation? Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years. In this situation, the couple does not qualify for any home buyer tax credit. Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.
Spouse A does appear to qualify for the $6,500 repeat buyer credit, but because Spouse B has not owned and lived in the same principal residence for at least five years, neither of them can claim the repeat home buyer tax credit.
So, please tell elected officials not to discriminate against married, unmarried or newly married people. Everyone should have had an equal opportunity for the home buyer tax credit.
What do you think?
Should You Buy a Home on Seattle's Eastside Now or Wait?
Should you buy a home now on Seattle’s eastside now or wait until after the tax credit expires at the end of April?
People were talking on the Wall Street Journal site and on Zillow about this very issue. Today people don’t just ask, “How’s the real estate market?” They ask, “What do you think will happen to the real estate market after the tax credit?”
Here are some of the things people are wondering:
- Do I buy now?
- Do I wait?
- Will I get a better deal now or if I wait?
- Is it worth passing on the tax credit and waiting to see if prices come down after April 30th?
- Is it better to buy now because there is a healthy number of homes for sale and good interest rates?
- Will there be more homes to choose from later?
- Will interest rates go up and cancel out any possible decline in prices?
I got my crystal ball out as did many others. Money Magazine made a strong case for buying now. Warren Buffett, on the other hand, thought the real estate market would pick up in 2011. Luke Mullins of US News and World Report presented the positive aspects of home ownership, even in today’s real estate market. Truthfully, no one knows what will happen and we can only speculate about what may happen with prices, the number of homes on the market and interest rates. But all these variables should be considered when making a decision about whether to purchase a home now or later.
I believe there are good deals on a home now and will be after the tax credit, but it’s on a case by case basis. Here’s why I say this:
Right now…
$6500-8000 home buyer tax credit available for most buyers.
Historically low interest rates.
Good selection of homes, many with very realistic home sellers and prices.
Having the tax credit of $6500-8000 and terrific interest rates, increases buying power. Typically, your loan payment is amortized over 15 or 30 years, a lower interest rate means more dollars per month in your pocket.
Later…
Will prices drop after the tax credit goes away on April 30th? No one really knows. There may be more homes on the market, which we typically see in the summer months in the Seattle area. If so, the law of supply and demand will kick in. More homes + less demand= lower prices. But we really don’t know if this will happen. We don’t know if there will be less demand. We can only guess. We can only gamble on what may be.
However, there’s a good chance interest rates will go up, which means purchasing power will go down. If rates go up 1%, then purchasing power goes down by about 10%. This means if you could afford a home for $330,000, if rates do go up by 1%, you would then qualify for a home at $300,000.
The impact of interest rates on buying power
Buying a home will, obviously, be less expensive if prices drop (but we don’t know if they will), and mortgage rates could also be a higher ( again, just a guess, but looking pretty certain), which could more than cancel out any savings in the price of the home. Remember, I’m not just talking about your initial investment, I’m talking about spreading the total cost out over the time you own your home.
The location factor:
Real estate is hyperlocal. There is no one size fits all real estate locales, individual buyers or individual sellers. Some areas of the Seattle- eastside real estate market will remain stronger than others. Within each city on the Eastside, Bellevue, Redmond, Kirkland, it will vary. The East of Market neighborhood in Kirkland may be vastly different than Kirkland’s Rose Hill real estate market. We see that today with a difference in real estate sales performance in different areas on Seattle’s eastside. So no one should make a “one size fits all” about the real estate market. It will depend on how hot the area is, how many homes are on the market, and how hot the house may be. ( The Queen Anne neighborhood in Seattle seems to remain hot through most real estate markets, as an example.)
Some neighborhoods will be full of homes for sale and the homes in these areas will need to be priced more competitively. Other areas will have fewer homes to buy. These areas will have stiff competition among the sellers to grab the buyers. Buyers will be looking harder at the overall value each home brings them.
The home factor:
In every real estate market, you’ll find fabulous homes. These homes will be perfect, priced right, and terrific values. Homes that shine will be the ones to sell in any market.
The emotional factor…
For most people, it’s a huge personal decision when to buy and what home to buy. If you find a great house and are able to get it for a reasonable price for the real estate market at the time, it may make sense to you to buy. There are the financial aspects of buying a home and the emotional aspects. You might find the home you can’t live without and it’ll be worth it to you to buy now rather later. You may not find a home now and miss using the home buyer tax credit, but you may not want to buy a home now just to get the tax credit.
There are going to be great homes now and in the future. There are also going to be great deals now and in the future. The difference in today’s market is you’re dealing with a known quantity. You have to decide what works for you.
What do you think will happen with the Seattle-eastside real estate market later this year?
Is The Seattle Eastside Home Sales Race Soon to Be On?
Everyone who has wanted to sell on Seattle’s eastside in the last few years seems wants to sell in the next 60 days, including me.
I know some home sellers Angie Bondurant, my business partner, and I will be representing have been madly getting their homes ready to sell. I bet contractors on Seattle’s eastside are busier than they’ve been in a long time. The contractor I use has gone from working on a rental home I plan to sell to a client’s home. As home seller wanna-bes, we’re all in the same boat, scrambling to meet the looming deadline of April 30th. We’re hoping to catch that home buyer who wants to get the benefit of the 2010 home buyer tax credit. (By the way, I don’t think the market will fall apart after April 30th, 2010, but those thoughts will be for another post)
Right now, the number of homes and condos for sale in King County is doing it’s normal spring time creep up (yes, it’s spring here in Seattle). So far, the number of properties for sale isn’t unusually high.
- King County, WA Real Estate For Sale, 3-2-10
In some of the Seattle-eastside neighborhoods where I’ve sold a lot of homes and which I blog about, I’ve talked about the fact that there are fewer homes on the market. I think that may be changing and I am wondering if others are experiencing the same thing.
Are other Realtors seeing the same thing happening with their business?
Do you have more homes coming up for sale in the next 60 days?
Do you expect to sell more homes or condos in the next 60 days because of the tax credit?
Are home owners seeing more “For Sale” signs popping up in their neighborhoods?
