As the leaves on the trees finish their glorious metamorphosis and the colored leaves now lay on the cold, damp ground or blowing in the wind. This is a clear indicator that our year is coming to a close. The well known break in the public schools are happening now for “teacher’s convention”. Those school aged kids enjoy a nice break to relax or some families use it as a time for a quick vacation, since it is only Jersey school out at this time.  Also, we turn to thoughts of Thanksgiving creeping up on us.

For those of us who make real estate our career, we feel thankful today after learning that the government has decided to keep the incentives for 1st time homebuyers continuing into 2010. According to Charles McMillan, the 2009 National Association of Realtors (NAR) President, Congress passed a bill today that extends and expands the homebuyer tax credit. The extension and expansion will become effective as soon as President Obama signs the bill. The $8,000 tax credit will continue for 1st time homebuyers. For current homeowners to be eligible for the NEW $6,500 tax credit, they must have used the home, and sold the home or is being sold as a principal residence after living in it consecutively, for 5 of the previous 8 years.

This will hopefully be the boost to the real estate market continue upward in the sales activity for 2009-10. It should help more than just the lower end price points and first time buyers. Even before this positive news for the market, I have been very busy. This has not been a “typical” period, since by November; things typically start to slow down. I am not finding that to be the case this year. With interest rates still so low, the buyers that act now will look like a genius, as rates should only go higher from here. I believe, when we look back at the 2009 market trends next year, we will notice that June/July 2009 was a “low” and considered the right time to buy.

The commercial real estate market is another “bird” and an interesting one to evaluate in this market. Right now if you are a buyer in need of warehouse space in Central NJ, there is a glut of properties on the market. For many investors, the consideration to purchase a commercial property, one my evaluate  the rate of return—positive/negative cash flow. The deals that seem to make sense for people are one that have the buyer paying cash. The more money down, the smaller need for a mortgage payment-as this hurts your cash flow numbers when you need to borrow. And those that have so much cash on hand, would rather make a small positive cash flow, that have your money just sit in accounts making almost nothing.
 
I have a great investment property listed for sale in Bound Brook, NJ. Wonderful opportunity, especially for an “owner/occupier” need – someone who wants to use some part of the property for their own business use. This home is beautiful, fully renovated with the older Victorian charm from the late 1800s. Located in the “non-flood area”, this property could also be converted back to a single family use without need for a variance. The price is $429,000 with 6 units, huge on-site parking lot, and located within walking distance to Municipal Building, Police station, Post Office, Train , Business District(Main Street), Library, Schools, Houses of Worship, Theater, Firehouse, Banks and Route 28. All tenants have 1 year leases, separate utilities plus newer heating and cooling systems.

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a firsttime homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.

Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.