House Calls by Edith Lank

Hello: My husband and I are buying our first home. The owner is financing it for us and is not a relative or friend. Will we still be able to take advantage of the first-time home owners tax credit when we file next year? — e-mail

Answer: How you finance the purchase, or even if you pay all cash, has nothing to do with the $8,000 tax credit. The requirements are that:

— Neither of you has owned a home in the past three years.

— You are not buying from a close relative.

— You intend to make the house your principal residence.

— You fall below the top income limits. The tax credit starts to phase out at $150,000 income for a married couple filing jointly (half that for a single taxpayer) and disappears entirely at $170,000 ($95,000).

None of this tax credit needs to be repaid, by the way, if you remain in the house for at least the next three years. But you must complete the purchase before Dec, 1, so don't dawdle.

GOLD STAR FOR AGENT

Ms. Lank: You real estate agents deserve a gold star! I recommended a terrific real estate agent to my sister. He worked hard and managed to get many people to see her home. She would not take his advice to reduce the price. After three months, she gave the listing at a lower price to another agent who sold the house almost immediately.

Now she thinks the new agent is great, but not the other one! Did it ever occur to her that the house sold because she finally priced it right? Oh, no — duh! How do you put up with people like my sister? — J. H.

Answer: That first agent deserves something more than a gold star, after giving your sister three free months of hard work, advertising money and expert advice that was ignored.

You're wrong on one account — I don't have to put up with people like that. I am not a real estate agent. I gave up my license many years ago when I started writing this column.

SELL QUICK FOR CASH

What are the advantages and disadvantages of going with the Home Buyer Network? Are they creditable? — L.

L. R.

Answer: I am not familiar with the company you mention. I did find one with a similar name, and they say they'll buy your home immediately for all cash.

These type of companies buy at wholesale prices, hoping to sell at retail later. They'll have expenses, meanwhile, for legal costs of buying, property taxes, insurance, lost income from the cash they give you, utilities, possible repairs or broker commissions and legal costs when they do sell. Add in something for profit (why else would they do it?), and they will offer a lot less than you might get on the open market. And unless that is at least enough to pay off your mortgage, you won't be able to go through with the deal anyhow.

The advantage is that you can indeed be free of the property in a hurry. That's OK if it's what you need, as long as you understand the situation. I would certainly run any contract by my own lawyer, though, before signing anything.

If you have the leisure to test the market in the ordinary way, your home is worth more to someone who's going to live in it.

HOME SELLERS TAX BREAK

Edith: I have a question about selling my primary residence, which has been rented for the past two years. I know that a married couple can claim up to $500,000 tax-free money on the sale of their primary residence, but I need to know if the rule has changed about how long you must have lived in it over the past five years. We bought our home back in 1997 and lived there until May 2007. Then we rented it out. When do I need to sell it to take advantage of this tax shelter? — J. N.

Answer: The rule you're asking about hasn't changed for sellers in your situation. You'd qualify for the tax break if you sold before May 2010, because you would have owned and occupied the place as your primary residence for at least two of the five years before the sale.

You'd want professional help with your tax return, though, because there'd probably be a complicated bit of tax ("recaptured depreciation") due to the rental period.

You may be confused because there has been one recent change in the rule: if property was originally rented out and then changed to a principal residence, the opposite of your situation. For that one, at least five years' ownership is required to qualify.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

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