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Help A Buyer Out: 5 Tips Sellers Would give Buyers if they Could Posted under: Home Buying, Home Selling  |     March 6, 2013 12:36 PM  | The conventional wisdom is that buyers and sellers go together like oil and water. That is to say, they don’t go together at all. Some say they are at odds simply by virtue of sitting across the bargaining table from one another, which – along with negotiation and legal issues that are par for the home buying course – create the presumption that they want totally different things. The prime example of competing buyer and seller interests is this: the buyer wants to pay as little as possible, while the seller wants to get top dollar for the place. But there is another way to look at this entirely.  In fact, there’s a point of view from which the buyer and the seller want exactly the same thing:  the buyer wants to buy the place, and the seller wants to sell it to them!  And I’ve seen many buyers and sellers act cooperatively to achieve just that result. Nevertheless, there are things that sellers can see from their side of the table that you cannot. Sellers have insights into their own mindsets that, if revealed, can be very powerful tools in helping buyers optimize their approach, offer and interactions with the seller to both buyer’s and seller’s benefit. So, in the interest of helping both buyers and sellers move closer to an outcome that helps them both achieve their mutual goal, here are a few of the insider secrets from the seller’s side of the bargaining table that they would tell buyers, if they could.   1.    Trashing my house doesn’t make me want to sell it to you at a discount.  To a seller, their home is their castle. It’s the place where they’ve raised their children, and has been the backdrop for many of their memories. It’s the asset into which they’ve invested the lion’s share of their time and money, sometimes for years.  It’s an intensive expression of their personal tastes.  And it’s also the asset they must convert into as much money as possible to move forward with the next phase of their lives. All that said, the average seller knows most things about their home that you can see with the naked eye.  So if you, as a buyer, think trash talking a home, pointing out obvious flaws or issues is a good strategy for getting the price down, rest assured that you are not telling the seller anything they didn’t already know when they set the list price. In fact, you might very well be doing your case more harm than good, as this “strategy” is highly likely to alienate and insult the seller whose cooperation you seek. If you feel strongly that something about a place makes it less valuable than the comparables the seller seems to have based the list price on, work with your agent on how best to communicate your offer price rationale to the listing agent in a way that is diplomatic and fact-based.     2.    Knowing that you have cash makes me feel comfortable taking your offer.  With distressed properties, over-asking multiple offers, and the generally warm-to-hot seller’s market in many areas, it has become increasingly common for sellers to request proof of a buyer’s “cash to close.” (This usually takes the form of bank or other asset account statements, with the sensitive account number information blacked out for security purposes.) Some buyers in competitive situations have begun to proactively offer such proof, even when it hasn’t been requested, and even for non-cash offers. Other buyers, though, take offense. Why shouldn’t the mortgage pre-approval letter be enough?  Why should you have to jump through yet one more documentation hoop?  Is the seller just plain nosy? Why are they all in your business? One word: comfort. Over the last few years, the number of home sale transactions that went into – and fell out of – escrow due to last minute loan problems of pre-approved buyers hit a record high. While this is awful for buyers to go through, it’s even more disruptive for sellers, who are relying on the transaction to close in the time frame the buyer provided to move forward with their own lives. It’s also a worst case scenario for a seller who had 5 offers on the table to choose one and then have it fall out of escrow later on. And sellers’ agents know this – often, the issues which derail a buyer’s loan can be resolved with money, extra cash down, extra cash at closing, extra cash to put in escrow for post-closing repairs required by the lender or the city.  So, proving that you have more cash than you appear to need to close the deal doesn’t necessarily set you up for the seller to ask for more cash – but it might help them feel that you’re the buyer most likely to sidestep mortgage obstacles and seal the deal. 3.    It’s all about the Benjamins – but close-ability is a close second.  Buyers be on notice – all the love letters, cute dog pics and cookies in the world will not make your offer win out over others that are offering significantly higher than yours, financially speaking.  Now, please don’t write in telling me about the case of your cousin’s dog groomer’s tarot card reader who got a home for less than 10 other offers because she helped the little old lady seller take her garbage cans to the curb – most little old ladies need cash to get through their later years. There is always an exception to the rule, and it does sometimes happen that a seller will take a slightly lower offer than the highest for one reason or another.  But if you’re trying to create a plan that stacks the decks in your favor in a multiple offer situation, your first priority should be to offer as much as you can, without spending beyond what is affordable for you and beyond the home’s fair market value. That said, sellers also care – a lot – about how likely the offer they accept is to close escrow.  And when multiple offers get so numerous and so frenzied that buyers seem to be throwing money at a home, smart sellers pay attention to the fact that their home might very well not appraise at a crazily high price and focus on offers that seem realistic and close-able, which can mean offers below the highest. Approval letters, proof of cash to close, the professionalism with which the offer is prepared and presented (see below), and even things like your credit score, your choice of mortgage broker/professional – all these things contribute to or detract from a seller’s estimation of how close-able your offer is.  If you’re competing against other offers, you should be maxing out both your price and your offer’s close-ability, as evidenced by these characteristics.     4.    Your agent represents you to the world of sellers.  Choose wisely.  See above. A buyer’s broker or agent has a lot of influence on whether the transaction closes, and how smooth or bumpy the ride is. If your agent’s level of professionalism is lacking, it will show – and listing agents might actually rank your offer below others, in terms of close-ability.  If your agent’s level of professionalism is stellar, the opposite can occur. Before you choose an agent, ask around your circle of friends and do a little online searching or even calls to past clients to see what you can find out about their reputation for professionalism.     5.    Ask nicely – the old “flies with honey” adage is true. The conventional narrative about buyers and sellers is that they are adversaries. But I’ve been around this block a few times, and I think the average buyer would be absolutely gobsmacked at the number of times sellers are actually ready, willing and able to agree to their requests throughout a transaction. This is especially the case where: the buyers’ requests are reasonable and not nickel-and-dime nitpicks the buyers phrase their requests nicely, and the buyers have been living up to their end of the bargain throughout the course of the transaction. Compare this with buyers who try to hold sellers hostage to their requests with the threat that they’ll kill the deal if the seller doesn’t do every single penny-ante thing the buyer wants. I’ve seen sellers agree to leave valuable personal property behind, have repairs made, give thousands of dollars in repair credits or price reductions after a concerning inspection report – despite a hot seller’s market – all because they were good people, could afford to, and the buyer’s approach was more sweet than it was sour. SELLERS, past and present: It’s your turn – what advice have you always wanted to give home buyers?

10 Cheap Ways to Sell Your House for More By Ross Boissoneau | Money Talks News – Thu, Jul 5, 2012 4:21 AM EDT mg width=1 height=1 alt=”” src=”http://us.bc.yahoo.com/b?P=.aYTWArHg2_f43LfUTAQnABlYw6jw1EwEkoACkLE&T=1fngsi20r%2fX%3d1362104906%2fE%3d1183311983%2fR%3dfin-glob%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d3014458414%2fH%3dX2lkPSJiNzk5M2FhZC1iZWFjLTNjZjgtOTM1My04NTYwYzVlYTJmOTYiIGNhbl9zdXBwcmVzc191Z2M9IjEiIGNvbnRlbnQ9ImZpbmFuY2UiIHJlZnVybD0icmVmdXJsX2ZpbmFuY2VfeWFob29fY29tIiBycz0ibG1zaWQ6YTA3NzAwMDAwMDQwZ056QUFJIiBzZW5zaXRpdml0eT0iMCIgc2VydmVJZD0iLmFZVFdBckhnMl9mNDNMZlVUQVFuQUJsWXc2ancxRXdFa29BQ2tMRSIgc2l0ZUlkPSI0NDUxMDUxIiB0U3RtcD0iMTM2MjEwNDkwNjgyNDE0OSIgdG9waWM9InBmLVNlbGxpbmciIA–%2fQ%3d-1%2fS%3d1%2fJ%3d6E80C70A&U=12b56m0t3%2fN%3dimE4nGKL5VM-%2fC%3d-1%2fD%3dREC%2fB%3d-1%2fV%3d0″>   A couple of weeks ago, mortgage rates plummeted to all-time lows – 3.67 percent for a 30-year loan and 2.94 for a 15-year loan. They’ve crept up a bit lately, but they’re still a bargain. So why can’t I sell either of my houses? That’s right, I have two homes to sell: the house I live in now and the house I grew up in. My current home has been on the market for more than a year, and my family home since a month after my mother’s death. But despite showings, open houses, and those historically low mortgage rates, neither has sold. But I’m confident that will change – because I recently consulted professionals whose advice should help me sell faster. Implementing some of their advice would cost hundreds, but some could be cheap or free… 1. All the world’s a stage Let’s start with the potentially most expensive. In the video below, Money Talks News founder Stacy Johnson explains what “home staging” is, and how it can cost up to $5,000 a month – or as little as nothing. Click here to watch ‘Staging Your Home for a Sale’ on MoneyTalksNews.com As you saw in that video, staging a home is just about making it more like an uncluttered luxury hotel suite and less like your family’s home. Do it on the inside and outside and your home will probably sell faster and for more. 2. Find the right professional Sometimes you forget the obvious: The best, smartest thing a homeowner can do is find the right real estate agent for them. There are all kinds of pros out there, with all kinds of approaches and personalities. So how do you find the perfect fit? The easiest ways are also free: Get referrals. Obviously, the easiest step is simply to ask friends and family. But be careful, because an agent who did well selling your sister’s fixer-upper isn’t necessarily the best one to sell your four-bedroom raised ranch. Agents can specialize not only in geography but also in price ranges. Go to open houses. In this case, you aren’t checking out the home, but the agent. And don’t fret that you aren’t interested in the house – smart agents know they’re also selling themselves at open houses. Go online. If those first two options aren’t working for you, search sites like RealEstateAgent.com and Realtor.com. When you find a few agents you might like, check them out online before contacting them. Are their websites professional-looking and inviting? Do they promote their properties well? Then call them. If the conversation goes well, set up a meeting. But remember, you have to feel comfortable, because this individual is helping you sell your most expensive possession. 3. Clean and de-clutter Cleaning is obvious – we shouldn’t even have to mention that a dirty kitchen or bathroom will cost you customers. But clutter is another matter. Step back and try to look at your home the way someone else would for the very first time. The half-dead philodendron? Toss it out. That old ratty hassock? Goodwill. And what about the garage? If you use it to store everything but your car, clean it out so a prospective buyer can imagine pulling their own vehicle in there. (Although they’ll probably do just like you and use it for storage.) 4. Maximize your home’s curb appeal Mow the lawn. Trim the shrubs. Buy a new welcome mat. Add a hanging plant next to your entrance, or some large terra-cotta pots filled with colorful blooms. This is crucial – online pictures of your front door will likely be the introduction to prospective buyers. 5. Invest in a friend If a professional home staging profession is too expensive, ask a friend or your real estate agent to come in and give an honest assessment of your home. Having someone objective look at what you see everyday can yield results regarding items or spaces you as a homeowner have become blind to. 6. Create rooms Substituting one room’s use for another is a cheap way to transform a three-bedroom home with a den into a four-bedroom home. If it doesn’t have a closet, add an armoire. Or maybe your home has a formal dining room that’s never used. Add doors if it doesn’t have them and a freestanding wardrobe – and you’ve got an instant main floor master bedroom. 7. Paint Nothing can instantly transform a room like a new coat of paint. That’s especially true if you’re going from something dark and dingy (and scratched and dirty) to something light, bright, and white. Painting is one of the easiest and cheapest ways to change and improve a room’s appearance. Anyone can do it. I know, because I have. A bedroom upstairs and the kitchen and dining room in my main house, and two bedrooms in my parents’ home. HUGE difference. 8. Bring the outdoors in and take the indoors out Plant the decorative plants not just in the ground around the deck, but inside. Furnish your seating areas outside with things you would normally find indoors, like soft cushions. Bridging the inside and the outdoors expands the feel of your home. 9. Add storage New homebuyers are always looking for storage space. Maximize what you have by adding a closet storage system, incorporating shelves, two-tiered hangers, and the like. Storage doesn’t have to be deep to be useful. Open up a space between studs and walls, install shelving, and you’ve got the perfect place for a series of small shelves to store CDs and DVDs. 10. Lights, camera, action! Ceiling fixtures tend to get hung, then forgotten, which means they look dated before long. Inexpensive replacements from a home improvement store can brighten up the interior and make a room look more current. Don’t assume it’s sold till the cash changes hands… Last year I had an offer – two, actually – on my home. Both offers were “as is,” meaning with the dark, chipped kitchen floor, the water-stained ceiling in the kitchen, the ugly dirty walls upstairs and down. While awaiting closing, I neglected to paint or fix the floor or do any of the other things I had intended to do, as detailed here. When both those deals fell through, I’d lost an entire summer of traffic. So don’t let your guard down. Remember, a buyer has some specific needs and desires in mind: neighborhood, number of bedrooms and bathrooms, etc. But beyond that, buying a home is an emotional decision. Welcoming someone to your home – hopefully their new home – means keeping things bright, clean, uncluttered, and friendly.

Is It Safe to Sell Your House Now? By Ruth Simon | The Wall Street Journal – Mon, Feb 25, 2013 11:19 AM EST g width=1 height=1 alt=”” src=”http://us.bc.yahoo.com/b?P=ORd8HArHg2_f43LfUTAQnAAsYw6jw1EwEMMAAScv&T=1ev61cln8%2fX%3d1362104515%2fE%3d1183311983%2fR%3dfin-glob%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d1341561712%2fH%3dX2lkPSI4ODkxNWI5Yy0yMTE0LTNmMjctOTI5OC1kOTk0OWI5NzdmZjkiIGNhbl9zdXBwcmVzc191Z2M9IjEiIGNvbnRlbnQ9ImZpbmFuY2UiIHJlZnVybD0icmVmdXJsX2ZpbmFuY2VfeWFob29fY29tIiBycz0ibG1zaWQ6YTA3NzAwMDAwMDNLTnJPQUFXIiBzZXJ2ZUlkPSJPUmQ4SEFySGcyX2Y0M0xmVVRBUW5BQXNZdzZqdzFFd0VNTUFBU2N2IiBzaXRlSWQ9IjQ0NTEwNTEiIHRTdG1wPSIxMzYyMTA0NTE1ODE5MjYxIiB0b3BpYz0icGYtU2VsbGluZyIg%2fQ%3d-1%2fS%3d1%2fJ%3d9482C70A&U=12bkpg8jl%2fN%3dCAsvnWKL5Mw-%2fC%3d-1%2fD%3dREC%2fB%3d-1%2fV%3d0″>   It might finally be time to come out of the basement. Seven years after the housing market began to collapse, rising prices and thinner inventories are presenting new opportunities for home sellers. Some hot markets are even seeing multiple offers for the same property—a phenomenon rarely seen since the boom years—as buyers become more confident and seek to take advantage of today’s near-record-low mortgage rates. Home prices nationally climbed 8.3% in December from the same period a year earlier, according to CoreLogic, a real-estate analytics company. The increase was the largest since May 2006 and the 10th consecutive monthly gain. The CoreLogic figures include foreclosures and other distressed sales. The gains are good news for would-be sellers who have been stranded on the sidelines since home prices peaked in 2006. Nearly one in four homeowners and renters say now is a good time to sell a home, according to a survey released this month by Fannie Mae, the government-backed mortgage company, up from 11% a year earlier. “You will unambiguously see more people test the water,” says Thomas Lawler, an independent housing economist in Leesburg, Va. He expects home prices to rise another 3% this year. Thinking about selling? You are likely to find a buyer more quickly and at a better price if you factor in local market conditions and recent sales before setting an asking price, burnish your home’s Internet profile and plan ahead for a home appraisal. Acting soon may pay off as well. While trends vary by region, buyer search activity generally peaks in March and April, while seller listings peak in July, says Jed Kolko, chief economist at real-estate website Trulia.com. “Most sellers would be better off if they pushed the process up a couple of months,” he says. Sellers could face headwinds if mortgage rates jump or the economy weakens, while the supply of homes for sale is likely to increase over the next few months, creating more competition, say real-estate agents. Don’t expect to make a killing. Even after the recent gains, home prices remain about 27% below their 2006 highs, according to CoreLogic. In some markets, prices remain so low that selling is likely to prove painful—unless you are looking to buy a more expensive home at a discount. “The only reason I would sell today is if I wanted something more than I currently have,” says Craig Beggins, president of Century 21 Beggins Enterprises in Tampa Bay, Fla., where prices are still off more than 40% from their 2006 peak. Still, in many markets, sellers have more of an edge than they have had in years. One big reason: The number of existing homes on the market dropped to 1.74 million in January, down 25% from a year earlier and the lowest level since December 1999, according to the National Association of Realtors. Houses are also selling faster. The median number of days on the market for homes in January was 71, according to the Realtors group, meaning half of all homes sold within that time. That’s down from 99 days one year ago. Elizabeth Tolli first put her 4,400-square-foot St. Petersburg, Fla., house up for sale in late 2009, but took the listing down a year later after not receiving any offers. She recently put it back on the market. “I feel more confident, even if prices aren’t at the height they were six or seven years ago,” says Ms. Tolli, who has set a $1.2 million asking price for the five-bedroom waterfront property. That is more than it would have fetched a year or two ago, she says, but still well below its peak value of more than $2 million. If you are thinking of making a move, start by assessing conditions in your local market. Lanny Baker, chief executive of ZipRealty, an online real-estate brokerage based in Emeryville, Calif., suggests focusing on five measures: price changes, the inventory of homes for sale, competition from foreclosures, the average time it takes a home to sell and the gap between selling prices and list prices. In markets such as Las Vegas, San Francisco, Los Angeles and Washington, D.C., “prices are up, competition is down, bank competition is down more, days on the market are shorter, and the prices being realized relative to the list price have really improved,” all good news for sellers, Mr. Baker says. But sellers shouldn’t be complacent. Here are some steps to consider. Interview multiple agents. Some people prefer to handle the selling process themselves. But if you plan to use a real-estate agent, start by interviewing several contenders. Mr. Baker of ZipRealty suggests narrowing your search to agents who have handled many sales in your neighborhood. They are likely to have the best view of local market conditions and can better assess what your home may sell for and how it should be marketed, he says. Nancy Vaske, a jewelry designer in Chicago, interviewed four brokers before putting her 1,800-square-foot condominium on the market this past week for an asking price of $995,000. “I wanted to know whether they had sold any units in my building because it’s a specific market in the city, and whether they’ve represented the buyer or the seller,” she says. The broker Ms. Vaske chose has represented both sellers and buyers in her building, and “probably knows more details about the workings of this building than most residents do,” she says. Adjust your sights to today’s market. Set aside what you home might have fetched in 2006 and focus instead on what homes are selling for today. Dan Elsea, president of Real Estate One in Detroit, uses recent sales as his guide, paying particular attention to properties that have received multiple offers. He prefers the homes he sells to be among the five lowest-priced properties among similar homes. “Typically, a buyer will see and remember five homes at a time,” he explains. Pay attention to how long competing homes have been on the market. These days, well-priced homes often sell in a week or two, while homes that languish for months are typically priced at unrealistic levels. Don’t overreach. Given today’s thin inventories, it is tempting to reach for the stars. But if you get greedy and set the price too high, you are likely to wind up in a downward spiral. “You are going to have your largest viewing audience in your first days on the market, when the house is the newest product on the shelf,” says Lloyd Fox, a broker at Long Realty in Scottsdale, Ariz. If the price is too high, buyers and agents are likely to relegate your listing to the sidelines. Properly priced homes are likely to get eight to 10 showings their first week on the market and an offer soon after, Mr. Fox says. If not, “you have missed the market” and it’s likely a price cut is in order, he adds. Make the Internet work for you. Most home buyers and agents are now starting the search process online, which means it is important to make the Internet a key part of your marketing strategy. Begin by carefully selecting the photos you will post online. For maximum impact, start with the photo “that is going to tell the best story of your home,” whether it’s the front view or a special feature, says Mr. Fox, the Scottsdale broker. Too many shots of a single room could bore buyers, he adds. For Kenneth Vaughan’s Phoenix home, Mr. Fox started with a photo of the home’s exterior to show its “curb appeal,” followed by photos of the living room, kitchen, backyard and master bedroom and bathroom. The home, which is selling for $119,900, received three full-priced offers in the first week, says Mr. Vaughan, a retired police officer. Factor in Internet searches when setting your listing price. Because most buyers tend to search in $25,000 or $50,000 increments, you can maximize your exposure by pricing your home at a round number, such as $400,000. That way the house will show up when buyers search for homes in the $350,000 to $400,000 range and for those priced at $400,000 to $450,000.      Weigh multiple offers carefully. In cases of multiple bidders, you should focus not just on price, but also on terms. In comparing two competing bids at similar prices, Kristine Lambrecht, an agent at Real Estate One in Clarkston, Mich., recommends choosing the buyer who is putting down more cash or is willing to forgo an inspection, since those deals are likely to close sooner and with fewer hassles. If she thinks the appraisal will be lower than the sale price, she will take a slightly lower bid if the buyer is willing to guarantee the purchase price. Clean up your act. Even in a market where inventories are thin, a home isn’t likely to sell if it looks shabby or crowded. At a minimum, you’ll need to touch up the paint, clean the carpet and pare your possessions. Suzanne Peltier, who lives in Farmington Hills, Mich., hired a handyman to patch loose bricks and touch up the paint on her four-bedroom Colonial before putting it on the market. She also removed some of her furniture so the home looks bigger. Julie Kaczor, a broker at Baird & Warner Real Estate in Chicago’s western suburbs, advises clients to get rid of magazine racks, statues, fireplace tools and anything else that can clutter up the edges of a room. She looks for inexpensive fixes with good payoffs, such as a fresh coat of paint, removing outdated window treatments or a carpet cleaning. Ron Phipps, principal broker at Phipps Realty in Warwick, R.I., often sends clients to other sellers’ open houses to size up the competition and get a better sense of how buyers may view their home. “It’s a good way to do counterintelligence,” he says. “It’s also a good way to see what works in terms of staging and presentation and what makes you uncomfortable.”      Plan ahead for the appraisal. About 30% of real-estate agents reported that low appraisals had resulted in the cancellation, delay or renegotiation of a purchase, according to a January survey by the National Association of Realtors. You can reduce the chances you will encounter problems by providing the appraiser with examples of comparable sales and pointing out special features. Barbara Moody, an agent at Coldwell Banker United Realtors in Sugar Land, Texas, prepares a booklet for appraisers that includes examples of comparable sales, information about the home and receipts for substantial upgrades such as a swimming pool or kitchen renovation. When a recent sale was almost torpedoed by a low valuation, Ms. Moody showed the appraiser comparable homes he had missed. The result: The appraiser raised his valuation by $7,000 to $129,000. The buyer and seller then split the difference between the appraised value and the $132,000 price they had initially agreed on. Jan Baker, the home’s former owner, says the deal would have fallen through without the higher appraisal. “I would have had to have rented it again,” says Ms. Baker, a lawyer who purchased the home in 2005 for $136,900 and now lives in Midland, Texas.

Homebuyer tax credit claims and payback  Taxes » Tax Credits » Homebuyer Tax Credit Claims And Payback The first-time homebuyer tax credit has made it possible for many people to own a house. The original first-time homebuyer tax credit provided buyers with a tax credit of up to $7,500. The tax break subsequently was expanded, with a new credit limit of $8,000 for first-time homebuyers and $6,500 for homeowners seeking to move into another residence. But as with all things tax, in order to get the most of this tax benefit, homeowners must follow the Internal Revenue Service rules. Paying back the 2008 tax year claim The original first-time homebuyer tax credit was not a true credit. Rather, it essentially was an interest-free loan from Uncle Sam, and every loan has payback terms. In this case, the credit is to be repaid in 15 equal payments of $500 each tax-filing time, beginning with 2010 returns. The first tax year that this credit was repaid, you had to complete Form 5405 and transfer the appropriate payment amount to your Form 1040. You’ll continue to repay the credit each filing season until it’s paid off, but you might not have to file a Form 5405 for future payments. If you bought the home in 2008 and owned and used it as your main residence for all of 2012, you can enter your 2012 repayment directly on line 59b of Form 1040 without attaching Form 5405. Lump-sum payback triggers Nowadays, however, few people stay in the same house for 15 years, so the IRS devised a way to get the original homebuyer credit back from those folks. When you quit using the home as your main residence, for example by selling or renting the property, then you have to pay the balance of the $7,500 credit in full when you file the tax return for the year in which your living arrangements changed. There are some exceptions — what the IRS calls disposition situations — which could get you off the lump-sum repayment hook. You transfer your home as part of a divorce settlement. Your former spouse then is responsible for making the rest of the repayments. Your home is destroyed, condemned or disposed of under threat of condemnation. If you buy a replacement home within two years, you can continue to repay the credit in annual installments. If you die, any remaining annual installments are not due. However, if the credit was claimed on a joint return, the surviving spouse pays only his or her half of the remaining credit amount. And if you sell the house on which you claimed the $7,500 credit, your profit will determine how much you must pay back. When you sell, either by your choice or as part of a foreclosure, you only have to repay the credit up to the amount of the gain on the sale, if any. Subsequent homebuyer tax credits When the American Recovery and Reinvestment Act, often referred to as the stimulus bill, became law in 2009, it included changes to the homebuyer tax credit. The maximum first-time homebuyer tax credit amount was increased to $8,000 or 10 percent of a property’s purchase price, whichever was less. A second credit of up to $6,500 was created for current homeowners looking to buy another house. The tax break was made a real credit, meaning that in most cases the money would not have to be paid back. This credit was available to qualifying taxpayers who closed on the purchase of their homes by the end of November 2009. But the still-struggling housing sector prompted Congress to extend this tax credit even further. The Worker, Homeownership and Business Assistance Act of 2009 was signed into law Nov. 6, 2009, and gave credit-eligible homebuyers until June 30, 2010, to close on a property. 3-year residency required While there’s no longer an automatic payback of the latest version of the homebuyer tax credit, you could still owe the IRS if you don’t live in your home long enough. To get the homebuyer tax credit outright, you must live in the house as your principal residence for three consecutive years after purchase. If you move out within 36 months of purchase, you must pay back the full credit. The same exceptions as those that apply to the original first-time homebuyer credit could save you from the payback requirement. But if you simply move, either because you, for example, sold the home on which you claimed the credit or converted it to rental or business use, you must give back the $8,000. You’ll do so via your tax return filing for the tax year in which your residential circumstances changed, using Form 5405. This time, fill out part three. You also need to be aware the payback could cause other tax trouble. “They now owe the $8,000 and also could face an estimated tax penalty,” says John Sheeley, an enrolled agent with his own tax practice in Goshen, N.Y. “It’s not something most people are thinking about. If you sell your house, that’s a life-changing event. But something like this, that they might have this tax issue, doesn’t occur to them.” And even when they are made aware of the tax costs, that’s still not enough to prompt some homeowners to change their plans. One of Sheeley’s clients was a single man who bought a home in Brooklyn using the $8,000 tax credit. “Subsequently he meets the love of his life, who won’t leave Manhattan,” says Sheeley. “Now he plans to rent the place in Brooklyn to an unrelated third party, which triggers a recapture of the first-time homebuyer credit.” Sheeley explained the tax consequences to his client, but in this case love conquered the tax code. He headed to the neighboring borough, says Sheeley, because his sweetheart wouldn’t move to Brooklyn for $8,000.