In my last entry, I talked about some of the indicators that we are moving toward a recovery in the real estate market. So, I thought I would give you a little more good news!

According to the National Association of Realtors, the Pending Home Sales Index reached 94.6 in June, its highest in 2 years and a considerable improvement from 80.4 in January or 09. If buyer contracts continue to settle at this rate, home sale closings would be in the 5.2-5.5 million range for the year. Compare that with last years 4.9, and the fact that in June existing home sales increased for a third consecutive month, and I believe even the most pessimistic of us would have to agree…that’s great news!

One of the reasons for the increase is the Economic Stimulus Plan’s First Time Home Buyer Tax Credit. While I am not a tax professional, I can answer some of the basic questions and the ones I hear most often.

Q. Who is eligible?
A. Only first time buyers are eligible. This is defined as a buyer who has not owned a principal residence during the three year period prior to purchase. In the event you are married, neither you nor your spouse can have owned a principal residence in that time

Q. How is the tax credit determined?
A. The tax credit is equal to 10% of the homes purchase price, not to exceed $8000.

Q. How do I claim the credit?
A. You will claim the credit on your federal income tax return.

Q. Do I have to purchase a single family home?
A. No, the credit applies to any home used as a principal residence.

Q. When must I pay back the credit for a home I purchased in 2009?
A. The obligation to repay would be  only if the homes ceases to be your principal residence within 36 months from the date of purchase. Then the full amount of the credit received becomes due on your tax return for the year the home ceased to be your principal residence.

Q. What is the deadline for the credit and will Congress extend it?
A. The deadline is November 30, 2009.  There is a lot of speculation that the credit will be extended, but with Congress currently in recess, no one knows for sure.

So, with all of that in mind, I have three equally important tips.  First, time is of the essence if you want to take advantage of this opportunity. Secondly, I strongly suggest you consult a tax professional for your specific accounting needs. Thirdly, I suggest that you call Strategic Real Estate Investments,  your real estate professionals, for your real estate needs!