GOVERNOR SIGNS HOME TAX CREDIT:
Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.
This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state). Buyers also must be at least 18 years old and be unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.
California Association of Realtors, March 25, 2010
HOW TO MANAGE A CONTINGENT OFFER:
Most repeat homebuyers don't like selling their current home until they know where they're going. However, most repeat homebuyers can't qualify to buy before selling. So, how do you structure a contingent-sale offer so you get what you want without being homeless?
Sellers prefer offers that aren't contingent on the sale of another property. If the buyers' home doesn't sell, they can't buy the sellers' home -- and the sellers are stuck looking for another buyer.
As buyers, you should structure your offer so that it is both attractive to the sellers and accomplishes your goals. In some cases, this may mean paying a higher price than you would if your offer wasn't contingent on your home selling.
Recently, buyers from San Francisco wanted to buy a house across the bay in Piedmont that had been on the market for several months. They made an offer contingent on the sale of their San Francisco home. The seller accepted but insisted that the buyers pay the list price. The buyers agreed, their home sold, and both transactions closed.
Most sellers want a release clause included in a contingent-sale contract. This enables the sellers to continue offering their listing for sale. If they accept a backup offer, they can notify the contingent-sale buyers that they must remove their contingent-sale contingency and provide verification that they can close the transaction without having to sell their home. If the contingent-sale buyers are unwilling or unable to do so, the contract is canceled and the backup buyers move into primary position.
You could do a lot of work getting your home on the market and be bumped out of contract on the house you want to buy because you don't have the funds from the sale of your house to close the transaction. There are a couple of ways to avoid this situation.
HOUSE HUNTING TIP: Put your home on the market and find a buyer for it before you make an offer on your replacement home. Sellers are more receptive to offers made contingent on the closing of the sale of the buyers' home than they are on offers contingent on the buyers receiving an acceptable offer on their home.
If you find a seller that's receptive to an offer contingent on the close, negotiate to keep a release clause out of the contract. If all contingencies have been removed from the contract to sell your home, the seller will be more inclined to agree.
When you list your home for sale, it's a good idea to retain the right to rent back at your current home for a while after closing. This could keep you from having to make an interim move to a rental until you find a replacement home.
Another option to keep from having to move twice is to negotiate an arrangement where the seller won't invoke a release clause for a certain number of days after acceptance of your offer. Recently, buyers in Oakland, Calif., used this approach.
The buyers asked for 30 days from acceptance before the seller could invoke a release clause to give them time to find a buyer for their home. The sellers wanted 14 days. They settled on 21 days. The buyers' home was in contract in nine days.
Ideally, once you've found a buyer for your home, the seller should not be able to invoke the release clause. You should be willing to inform the seller immediately if that transaction fails and the sellers should the right to cancel your contract, if they want to.
THE CLOSING: Don't be surprised if the sellers want their listing agent to approve your home and list price. The sellers need to know that it's worth the risk to accept your contingent sale offer.
Inman News