The federal tax credit was expanded to include move-up buyers who buy a new home in the first part of 2010. What is a move-up buyer, and do you need to sell your current home to qualify for the program? What are the implications of selling later in the year? If you want to go to the source, you can check out H.R.3548.
What is a move-up buyer? In this instance, it’s someone buying another home who is a long-time resident of their current principal primary residence – having lived there for five consecutive years of the preceeding eight. The move-up buyer in this case doesn’t have to buy a more expensive home – it can cost more, less or the same (as long as it’s below the $800,000 program limit).
When do I have to buy my new home to qualify? You must be in a binding sales contract by April 30th 2010, and the home must be purchased by the end of June 2010.
What do I need to be careful of as April 30th approaches? You have to watch your negotiating position as you approach the deadline as a buyer. If you have an inspection contingency which goes over the April 30th deadline, your negotiating position may be weakened on repair items for example. The seller may know that this is your chance of getting $8,000 or $6,500 as a tax credit if you go ahead with the sale, and may be less willing to agree to repairs.
Do I need to sell my current home by April 30th to qualify as a move-up buyer? The short answer is No. (check out the IRS FAQ) You just have to transfer principal primary residence (where you live) to the new home. Whether or not you want to own multiple homes will depend on your finances.
Another factor which plays into the decision on whether to sell before buying is your take on the market if selling your former home. If you think that the removal of the tax incentive will reduce buyer demand, you may want to consider marketing your former home in the early part of 2010 to take advantage of stimulated buyers.