One thing certain is that the market never seems to stay the same! Sellers are certainly noticing a difference this year over last year. For many of them, it is difficult to accept the fact that price levels from 2006-2008 are no longer here.

Why are things different? The national economy has a lot to do with it. When people were making a lot of money, they spent it much more freely. Over the past several years, Lenders were very eager to loan money out, so the source of mortgage money was hardly ever in question. I read where the FDIC has taken over some 80-90 banks this year and without a doubt, Buyers/Borrowers are required to jump through more hoops in order to purchase a property. In my opinion, the loan pendulum has swung all the way from the “much too liberal” position to the “much too stringent” position.

Generally, the market will correct these extreme swings over time, but for now, it is making sales much more difficult to come by. With Sellers not necessarily aware of these conditions, it is causing some frustration between them and their listing agents as properties linger on the market.

BUYERS DELIGHT!

For those who get pre-approved by their lender or purchase with cash, there are some real buying opportunities becoming more prevalent. While there is still minimal foreclosure activity in Gillespie County, there is a segment of our market that needs to sell. Some properties have been listed for two to three years and their sellers are running out of patience. Others need to be more realistic from the very beginning and rely more on the Realtor to give them straight talk about the market.

Finding these opportunities is becoming easier to do than in the past. In my opinion, about 15% to 20% of our selling market is now in the category where they are more inclined to sell rather than listing at a high price and riding it until it finally sells. Low interest rates, USDA loans with low down payment requirements, and the $8000 tax credit are additional incentives for spurring some Buyers into taking advantage of the market.

Given this environment, here are some facts about our local real estate market. The information I have provided is sorted from the Gillespie County Multiple Listing System. I do not change any of the numbers sorted out by the computer inquiry, but I do add language to the headings in order for the reader to understand what the numbers relate to and for what time period is being covered.

Be aware that Days on Market (”DOM”) is generally understated, that is, the actual DOM tends to be longer than the number shown here because the MLS no longer tracks a listing when it expires and moves to Realtor B or is later renewed by the original listing agent. In these circumstances, the DOM starts over again at “0″ and this tends to understate the true time it takes to sell a listing.

Although I believe the information I provided is accurate, I relied on the GCBOR MLS system and I do not guarantee any of the information herein. Prior to making any purchase, sale, or business decision, I encourage the reader to contact their Realtor or due their own due diligence.

SEPTEMBER 1 MARKET UPDATE

In the last 30 days, the Gillespie County MLS system listed 3.28 new listings for every single listing that sold. Also, there were more price changes (primarily price reductions) than there were new listings. This ratio 1: 3.28 (sales to listings) is better for the last 30 days than the YTD ratio is through August 31, 2009. In plain English, it means the inventory is growing faster than the rate of sales, and the number of buying opportunities is growing.

Other key market factors are outlined in the following charts:

RESIDENTIAL PROPERTIES IN FREDERICKSBURG

We have a 17 month supply of residential listings and we are selling about 11.5 homes/month at a median price of approximately $187,000 or $126/SF. For the same time period in 2008, we sold 12.63 homes/month at a median price of approximately $205,000 or $131/SF.

LOT SALES

At the current rate of Lot sales (1.125/mo), we have an oversupply of inventory. Builders are pecking away at lots they previously purchased, but very few are buying additional lots from developers at this time for speculative purposes. The average “SOLD” price per lot is approximately $52,000 while the average “LIST” price per lot in inventory is over $85,000. Residential lot sales in 2009 show a dramatic decline over those sold in 2008.

Another large part of our market pertains to acreage properties and I will cover this in a subsequent blog. Stay tuned for more information. In the mean time, if you need help or have questions about real estate, please give me a call at (830) 997-6123.

Below is an analysis of some of the Fredericksburg subdivisions. Hopefully this will be helpful if you are considering moving to Fredericksburg in the future. Please contact me if you would like any additional information.
All pricing and square footage are based on MLS listings: 7/8/2009

Cherry Blossom Estates
(off North Cherry Street)
45 residential home sites
Homes currently available: 1
Price range: $279,000
Square footage: 1978
Lots available: 9
Price range: $54,500-$65,000

Crabapple Grove
(off Lower Crabapple Road)
Homes currently available: 9
Price range: $243,900-$334,850
Square footage: 1657-2229
No lots currently available on MLS

Cross Mountain West
(off North Cherry Street)
Homes currently available: 6
Price range: $250,000-$328,000
Square footage: 1720-2699
Deed restrictions state a minimum of 1500 square feet for homes
Lots available: 0

Heritage Hill Country
(off Highway 290 East)
Retirement community; at least one resident must be 55 or older
186 homes
Homes currently available: 13
Price range: $189,000-$371,500
Square footage: 1586-2499
No lots available

Oaks of Windcrest
(off Highway 16 South)
Relatively new subdivision
253 lots
Homes currently available: 3
Price range: $192,900-$204,900
Square footage: 1449-1609
Lots currently available: 33
Price range: $45,100-$62,400

Stone Ridge
(off Highway 16 North)
Homes currently available: 13
Price range: $308,900-$550,000
Square footage: 2111-3300
Lots currently available: 36
$47,500-$108,000

Windcrest
(off Highway 16 South)
Primarily townhomes and patio homes
125 home sites
Homes currently available: 7
Price range: $224,900-$299,000
Square footage: 1783-2360
Lots available: 5
Price range: $37,500-$75,000

The good news is that listings are selling at market values. Sellers that do not understand the market is under some stress tend to be frustrated by long marketing periods. As you can see by the above chart reproduced from MLS data, the market is off almost 50% in terms of total sales dollars and by almost 40% in terms of the number of units sold when compared to the same period in the previous year. This information represents all types of property listed in the Gillespie County Board of Realtors’ MLS system. Although the data represents listings outside the county, the vast majority of the listings are located in Gillespie County, Mason County, and Kimble County.

Keep watching for more dissection of the market numbers on The Burg. If we at GMAC Real Estate Fredericksburg can help you understand the real market numbers to assist with your sale, please give us a call at (830) 997-6123 and we will be happy to help.

Greetings and welcome to our market update. After an uptick in activity in late April and May, it felt like June was a bit of a let down in the number of showings. Let’s see what the numbers say. First, I like to check the MLS activity for the last 30 days. The chart below shows we are still seeing about three (3) new listings for every sale. That is close to what we have seen since January 1 of this year.

Sales YTD thru 6/30/2009 (In Gillespie County)

Previous Year, same time period

Sales YTD 1/1/2008 thru 6/30/2008

2 Years Previous, same time period

Sales YTD 1/1/2007 thru 6/30/2007

The number of sales and the total sales volume for the first six months of 2009 is off some 50% from the same time period in 2008. In addition, we are listing three times the number of properties we are selling. This creates more inventory than we like to see in a strong market. The good news is that Buyers are still in the market for those properties that are priced correctly!

Check back for more specific market updates during the week. I will dissect the sales by Type of Property to see if any single category is holding up better than the others. And if we can be of assistance at GMAC in Fredericksburg, please let us know.

During the past year there have been six properties without improvements between 100 and 200 acres listed on the Multiple Listing Service sold in Gillespie County.  The price range for these properties ranged from approximately $4255 per acre for about 116 acres to approximately $8500 per acre for about 188 acres both of which were in the northwest part of the county.  The average price per acre was approximately $6155.  Four properties sold were in the northwest part of the county and 2 were in the northeast.  

There was only one property greater than 200 acres without improvements in Gillespie County listed in the Multiple Listing Service sold the past year.  It was approximately 300 acres in the northeast section of the county which sold for approximately $7750 per acre.

 As of May 6, 2009, there are 16 properties greater than 100 acres with no improvements available on the MLS.

By Greg Oehler

Although currently we are experiencing more activity, this will give you an idea of what has occurred with land sales this Year-to-Date (as of 4/18/2009) vs. last year, same period.  Homes were affected as well, but not to the same degree.

Probably the two most important and reliable numbers in this MLS data sort are the Total Number of Land Sales and the Total Amount of Land Sales which I highlighted in Blue.  Some of the other numbers are deceiving for various reasons, such as the Average Price per sale, etc.  For instance, it went up not because overall land prices increased, but because there were so few Single Family residential lot sales (3) in 2009 compared to 2008 (20) and most land sales were small acreage tracts instead.  Acreage tracts tend to be larger and more expensive.

photo credit: respres

The first Tuesday of the month is “Foreclosure Day” in Texas.  Foreclosure happens when a Lender is unable to collect on a mortgage to a borrower.  In Texas, the Lender posts a public notice (usually on the Courthouse bulleting board) at least 21 days in advance of the first Tuesday of the month in which the property will be foreclosed.  Holidays are no exception.  I have seen foreclosures occur on January 1^st and on July 4!

The postings that are not worked out in advance of the first Tuesday are then sold on the Courthouse steps to the highest bidder.  Often times, the Lender turns out to be the highest bidder, but the public can bid as well.

Thankfully, we do not have many foreclosures in Gillespie County.  Some parts of the nation are overwhelmed with foreclosures and when lenders foreclose on collateral in mass, the foreclosure re-sale market can take control of retail real estate sales.  That means there are more foreclosure sales than retail market sales.  When that happens, the area generally sees a drop in value.   Why buy at retail when you have a large selection of foreclosures?

Although Gillespie County does not have many foreclosures, I see five to ten postings per month on the courthouse bulletin board.  Not all of the properties posted go through with foreclosure. Lenders and borrowers sometimes negotiate for additional time, or sometimes the borrower manages to come up with additional funds in desperation.

Why do foreclosures happen? There are various reasons, including the following:

…employment circumstances and/or job loss adversely affected the Borrower’s ability to repay the mortgage;

…health complications prevent the Borrower from earning income and the there is insufficient insurance;

…the Borrower’s personal life becomes an issue due to divorce, loss of a family member, etc;

…economic conditions - some Borrowers were incapable of repaying the loan from the beginning and were relying on market appreciation to cover the loan expenses.  When the cycle of appreciation stopped due to adverse economic conditions, they were left with no alternative because the Borrower was not able to sell the collateral for enough money to cover the loan;

…failure to pay personal income taxes;

…failure to pay a judgment;

…fraudulent borrowing/lending practices; and,

…default on other parts of the loan agreement such as payment of ad valorem taxes, HOA dues, insurance coverage, etc.

You may know of other situations that led to foreclosure, but this should cover the majority of reasons.

If someone is having difficulty keeping current on their mortgage, they should notify the Lender and keep them abreast of the situation.  Sometimes, a Lender will modify loan terms to be more affordable, especially mortgages where a balloon payment comes due or an interest rate adjustment creates an increased monthly payment.  In other cases, a Lender will allow a “short sale” and allow the collateral to be sold for less than the full payoff.  The important thing to do is contact the Lender!

While no one likes to see a lot of foreclosures, it is a necessary part of the real estate and lending business.  Lenders have to have recourse when their loans are not repaid.  When a Borrower signs the mortgage, somewhere in the language it usually includes the words “I promise to pay.”  Therefore, be careful when you become a Borrower and take on only the debt you are certain you can repay over time.

I plan to go into a little more depth in the foreclosure process in the next blog.  This will cover the actual sale and some of the things to watch out for when you purchase a foreclosure.   Until then, I hope you steer clear of foreclosure with your own mortgage!

photo credit: jas kaur

I visited the state capitol in Austin the last week in March to weigh in on several legislative matters that may affect you as it relates to real estate. Here are some of the issues teed up for the current session:

Appraisal Reform - Central Appraisal Districts were created in 1982 and their purpose is to assess market values which are used for property taxes. While many of these CADs are very good, some property owners perceive the process to be unfair and certainly not uniform across the CAD system in Texas. The Texas Association of Realtors (”TAR”) supports several reform bills which would do the following:

1. conduct a methods and procedures audit of the CAD every other year.
2. update and modernize the appraisal methods and oversight to ensure greater accountability and efficiency.
3. ensure a state entity has enforcement authority over CADs to ensure that uniform standard appraisal practices are being used.
4. require comparable sale evidence no older than 24 months be used and that it is appropriately adjusted for changes in the market value over time.
5. allow CADs o consolidate appraisal review boards.
6. allow for some appeals to be heard by the State Office of Administrative Hearings;
7. allow for a residence to be appraised as a residence; not on the basis of the “highest and best use” appraisal standard.

County Rulemaking Authority - TAR does not support the wholesale expansion of county rulemaking authority, but may support limited expansion to alleviate certain specific problems if the citizens vote on a county-wide referendum to expand the County’s powers.

Eminent Domain - TAR supports certain bills which enhance private property rights protection when property is taken by governmental entities by eminent domain.

Green Power and Energy Efficiency - Texans pay 56% more per kilowatt hour than the national average. TAR supports several bills which provide for a franchise tax credit for solar energy devices, create Emissions Management Districts to fund renewable energy systems and energy efficiency improvements on property in the district, and creates incentives for the capture and sequestration of carbon dioxide and other greenhouse gases.

photo credit: roland

Homeowner Associations - TAR supports bills that would reform and modernize regulation of homeowner associations to ensure protection of homeowner’s rights while maintaining a legal framework for efficient and effective management of associations.

Mandatory Sales-Price Disclosure - TAR opposes several bills which would require public disclosure of real estate sales prices.

Real Estate Transfer Tax - TAR is NOT in favor of a real estate transfer tax and supports several bills relating to the prohibition and/or disclosure of a fee associated with the transfer of real property.

Taxing Professional Services - TAR opposes efforts to expand the state sales-tax base to include professional services because it is likely to hinder economic recovery.

Transportation - TAR supports bills that prohibit diversions from gas tax revenue to non-transportation uses.

Many of these bills and proposed legislation will affect those of you who own real property. There were some 1600+/- Realtors in Austin who were introduced in the House and Senate galleries and who later visited senators and representatives of their districts in order to give them position statements. While writing and calling your representatives can definitely make a difference, it certainly makes a statement to personally hand your legislator a position paper, look him/her in the eyes and shake their hands in their own office. I trust that we have favorable influence on most of the key issues that may affect you and I certainly encourage you to make your own opinions known in Austin during the current legislative session.

By now you have probably heard of the $8,000 first-time homebuyer tax credit that was part of the American Recovery and Reinvestment Act. In case you are wondering what it is all about, I compiled this information from the National Association of Realtors and from Realtor.org that should clear up some of your questions.

Remember, the deadline to use this tax credit is December 31, 2009 so give us a call today at (830) 997-6123 to take advantage of this credit and what is perhaps the best real estate buying opportunity since the 1980s!

2009 Homebuyer Tax Credit

The homebuyer tax credit is one of 10 key provisions of the American Recovery and Reinvestment Act signed by President Obama into law on Feb. 17, 2009.

The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.  The credit does not require repayment.  Most of the mechanics of the credit will be the same as under the 2008 rules:  the credit will be claimed on a tax return to reduce the purchaser’s income tax liability.  If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Tax Credits — The Basics

1. What’s this new homebuyer tax incentive for 2009?

The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?

Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?

Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 - $8000 = $1500)

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?

This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference  between $8000 credit amount and the amount of tax liability. ($8000 - $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. How does withholding affect my tax credit and my refund?

A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

6. Is there an income restriction?

Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. How is my “income” determined?

For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

8. What if I worked abroad for part of the year?

Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

Not always. The credit phases-out between $75,000 - $95,000 for singles and $150,000 - $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return). For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown: Couple’s income $165,000 Income limit 150,000 Excess income $15,000 The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute).  In this example, the disallowed portion of the credit is 75% of $8000, or $6000 ($15,000/$20,000 = 75% x $8000 = $6000) Stated another way, only 25% of the credit amount would be allowed. In this example, the allowable credit would be $2000 (25% x $8000 = $2000).

10. What’s the definition of “principal residence?”

Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

11. Are there restrictions on the location of the property?

Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.

12. Are there restrictions related to the financing for the mortgage on the property?

In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

13. Do I have to repay the 2009 tax credit?

NO. There is no repayment for 2009 tax credits.

14. Do 2008 purchasers still have to repay their tax credit?

YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

Some Practical Questions

15. How do I apply for the credit?

There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

16. So I can’t use the credit amount as part of my downpayment?

No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

17. So there’s no way to get any cash flow benefits before I file my tax return?

Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

Some “Real World” Examples

18. What if I purchase later this year but can’t get to settlement before December 1?

The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

19. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?

You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options.

If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.

They can extend their 2008 income-tax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension.)

If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov)

Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

20. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?

No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

21. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?

No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

22. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well?

No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

23. I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit?

No; double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.

24. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?

One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. (See below, #24). Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?

The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

26. I have a home under construction. Am I eligible for the credit?

Yes, so long as you actually occupy the home before December 1, 2009.

WITHHOLDING EXAMPLES: Note: The impact of estimated tax payments would be the same. Situation 1: Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit. Result: Sally’s withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000. Situation 2: Nick and Nora file a joint return. Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit. Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 - $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax credit = $9200) Situation 3: Cesar and LuzMaria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 - $5000). They also qualify for the $8000 first-time homebuyer tax credit. Result: Cesar and LuzMaria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 - $2200 = $5800). If they owed penalties and/or interest, that amount would reduce the refund.

To Take Advantage of this Credit

Please give us a call at (830) 997-6123 or contact one of our agents directly to discuss how we can put this tax credit to work for you in your first-time purchase of a home. Remember, the deadline is December 31, 2009. Don’t get left behind!