HOMEBUYER TAX CREDIT DEADLINE QUICKLY APPROACHING
What buyers and sellers need to do now so they don’t miss out.
With only three months until the new $8,000 first-time homebuyer and the $6,500 existing home buyer federal tax credits are set to expire, time is running out on an opportunity that buyers and sellers may not see again. The tax credit, which was originally created in mid 2008, then expanded in January 2009 and extended again this past November, was only designed to be a short-term incentive to drive more buyers into the housing market. That’s why many people in Congress are saying that, come April 30, 2010 when the credit expires, “That is it!”
So the clock is ticking. The average real estate transaction, from offer to closing, takes approximately 90 days and that is just about where we are now. To meet the federal deadlines, a buyer must have a binding sales contract in place by April 30, and have the home purchase completed by June 30. To achieve those time frames, buyers need to act almost immediately. Those deadlines also mean that this is also a prime opportunity for sellers. As the April 30 deadline gets ever closer, we are bound to see an influx of home-seekers who are hoping to find a house and make an offer in time to receive the tax credit. So for sellers who have been considering moving up in the market, downsizing, or relocating, now is an opportune time to put their house on the market.
We’re at a unique time in real estate. The tax credit deadline is helping to create the “perfect storm” in the market, due to four key elements - I.I.I.P:
•Inventory: Although there are an overwhelming number of markets where inventory is down, and even with a decline in inventory year over year, there are still plenty of homes on the market for buyers to choose from.
•Interest Rates: Mortgage rates remain at near historic lows. This means higher purchasing power for buyers.
•Incentives: The extension and expansion of the homebuyer tax credit is providing benefits to buyers who may have otherwise not been interested in getting into the market.
•Prices: Affordability remains at an all time record level nationally and in many of our local markets as well.
While the urgency of trying to find and close on a home before the deadline may seem stressful, it doesn’t have to be. For those who are in the early phase of the home buying process, there are a few key things that you can do to speed up the process:
•Find A Qualified Real Estate Agent. If you do not already have one, work with a real estate agent who will be able to help identify mortgage lenders, home inspectors, lawyers and others who will play a role in helping to get the buying process completed by the April 30 deadline.
•Know Before You Go. Free online tools and mobile applications for smart phones are available to help you quickly and conveniently learn about neighborhoods and view homes on the market. Consult with your own tax advisor as to your ability to qualify for the tax credit based upon income levels, length of residency/homeownership and housing prices. Arming yourself with as much knowledge as possible in the beginning is bound to save time in the long-run.
•Get Pre-Approved for a Loan. “Pre-approval” means that a lender has checked your credit and other credentials and is prepared to making a loan. Not only is this valuable to sellers, and may give you an advantage over other offers they receive, but it could speed up the loan process and allow you to complete the necessary paperwork before the tax credit deadline.
The tax credit has done a lot for the real estate industry since its inception. According to the National Association of Realtors, 47% of all homes sold last year were purchased by first-time home buyers. Paul Bishop, NAR vice president of research, has said that first-time buyers “are critical to housing and a general economic recovery because the market always heals from the bottom up - they absorb inventory, free existing owners to make a trade and stimulate related goods and services.”