Tax credit info

Congress passed a tax credit of up to $8,000 for qualified first-time homebuyers. The home must be purchased (closed) between Jan. 1 and Dec. 1, 2009. Unlike the tax credit passed in 2008, this money does not have to be repaid. There are qualifications to using the tax credit. Real estate agents and lenders can provide details and answer questions about specific circumstances.

Online information

Charleston Trident Association of Realtors
CTAR’s Web site
Quick facts about the tax credit

National Association of Home Builders
NAHB’s tax credit Web site
Who qualifies for the tax credit?

S.C. Realtors Association
SCAR’s Web site
Data on markets around S.C.

Internal Revenue Service
Tax credit information from the IRS
IRS video on tax credit

By Andy Owens
aowens@scbiznews.com
Published April 23, 2009

A federal tax incentive for first-time homebuyers is greasing the rusty wheels of South Carolina’s residential real estate industry for the first time in months, according to agents and brokers across the state.

Agencies are reporting an increase in traffic and closings because of the federal tax incentive that gives up to $8,000 to first time homebuyers who qualify and close by Dec. 1.

“Over the last three weeks, the news has been encouraging — lots of activity,” said Nick Kremydas, CEO of the S.C. Association of Realtors. “My members are very optimistic, and they haven’t been this optimistic in a while.”

That sentiment was echoed across the Upstate, Midlands and Lowcountry, as Realtors and agents hope the increase in traffic and closings will create momentum for a turnaround in the residential market.

“The market where they live might not be as good as it could be, but first-time homebuyers don’t have that baggage,” said Rebecca Gooden, a broker with Keller Williams affiliate Gooden-Faircloth Real Estate in Mount Pleasant. “It has been a great incentive. When you think about it, people want to own, they just need that extra little push or a reason to do it.”

A federal tax credit of up to $8,000 is available to first-time buyers — defined as those who haven’t owned a home for three years — and that, combined with low interest rates and lower-than-usual home prices, has been enough to double some of the business agents are seeing.

“Just in the last 45 days, we’ve written six contracts for first-time homebuyers, and they are very, very excited,” said Tiffany Johnson-Gunn, a Realtor with ERA Wilder Realty in Columbia. “Their first question when they are in here is, ‘How do I get that $8,000 tax credit and do I have to pay it back?’”

Buyers don’t have to pay it back, which is one of the biggest draws for the program, but the clock is ticking. Sales must close by Dec. 1 to qualify. Typically, home closings take 30 to 45 days from the time of the initial offer, and closing on a short sell or foreclosure property could take up to 90 days.

ERA Wilder Realty holds monthly workshops to educate buyers about the tax incentive.

Unlike the incentive passed for 2008, which was essentially an interest-free loan, this incentive is a tax credit that would be claimed on a federal tax return.

“You actually get paid to buy a house,” said Seth Siegler, president of Simplistate LLC, a new brokerage in Charleston that offers buyer rebates as an incentive. “You’re getting the house on sale, you’re getting the gigantic tax credit and, sometimes, you’re getting a buyer rebate.”

Siegler said an upturn in stocks and spring weather also have helped bring some buyers to the market.

Whether this will translate into a true momentum shift remains to be seen. Nick Sabatine, CEO of the Greater Greenville Realtors Association, said the National Association of Realtors expects that 2 million homebuyers will take advantage of the incentive by the deadline, which could carry over into the fall.

“What I’m hoping will happen (is) this will create some momentum for the end of the year,” Sabatine said. “I think we’ve bottomed out. Hopefully, by November, things will be on the upswing again. This will be the impetus that we need to do that. Activity breeds activity, so I think any activity is good.”

Carolina One President and CEO Patty Scarafile said that, even before the tax credit was offered, the National Association of Realtors predicted that 60% of homes purchased in 2009 would be bought by first-time homebuyers.

“The people, when they find out what the opportunities are, are just blown away,” Scarafile said. “If you combine that $8,000 advantage and you look at the selection and the interest rates and the value out there, what an incredible opportunity it is.”

Scarafile said sellers who are going to move in the next two years have no reason to wait, because they can make up any perceived loss by purchasing a home priced at a good value.

“I really think with all of the REOs (bank repossessions) and foreclosures that are in the market — and are going to be in the market for a while — I don’t think pricing is going to restore itself for a couple of years,” she said.