It's no secret that there are federal tax credits available for many people who are looking to buy a home. Both first-time and non-first-time homebuyers now can play the game.
The people who are among most aware of the credits, of course, are people wanting to sell a home. It's not difficult at all to find For Sale signs also advertising the $8,000 tax credit, and, as I may find out soon, it will probably enter the conversation at the negotiation table.
Especially if the initial offer is a lowball offer:
“Why, Mr. M.B. Hunter, that offer is awfully low. Perhaps you aren't aware of the $6,500 tax credit you and your lovely wife are eligible for, as qualifying second-time homebuyers?”
To which I can reply:
“Ahh, yes, Ms. Realtor®, that's very true! But if my job takes me away from the area and I have to move within three years, then we have to pay that $6,500 back!”
(I'd like to claim credit for thinking of this, but it was actually from a financial planner I know.)
Actually, as of right now, I'm just assuming that I'll have to pay it back under that circumstance. The law is new enough that IRS Form 5405 doesn't reflect the situations of the long-time homeowner. But if I were a first-time homebuyer (taking advantage of the $8,000 tax credit) then I'd definitely need to be paying that back if I moved within three years of the purchase.
Just as it's a bad idea to mention your trade-in when you're buying a car, it's a bad idea to let tax credits enter real estate negotiations. Why? Because the tax credits only enter the equation after the sale, not before. It's a red herring. Additionally, it's unlikely that the bank will take potential tax credits into account when they underwrite the mortgage, because it's a bit of a financial wild card.
Happy lowballing!
To which the seller should respond ‘what business do you have buying in the first place if you don’t expect to own it for several years’.