It appears that the market is certainly picking up as the big deadline for the Tax Credit approaches. In the past week, I have had three separate buyers have to deal with a multiple offer situation on the house they fell in love with. Two of these homes had been on the market for about a month and another for 3 months!
What does this mean? It means that spring is upon us and people are getting out shopping again. But it also is reminiscent of last October when we thought the Tax Credit was going to expire in November. Already I am seeing the same trends develop and buyers procrastinating on their home search. I found this great article on how to best prepare to find a home in April, and most importantly, see this home close so you still qualify for the credit. The moral of the story? Don't wait, call your agent today and get looking!
Homebuyers still have time to buy a home and meet the deadlines, but they will need to act soon and be proactive throughout the transaction.
The homebuyer tax credit is worth 10 percent of the home's sale price, up to $8,000 for buyers who haven't owned a home in the previous three years and up to $6,500 for buyers who have owned and occupied a principal residence for at least five consecutive years during the eight-year period that ends on the day the new home is purchased.
Here are some tips for last-minute buyers:
- The buyer must enter into a binding contract to purchase the home on or before April 30 of this year. The term binding contract isn't defined in the homebuyer tax credit law and may be subject to interpretation. Generally, the term refers to an agreement that's signed by both parties and has a deposit in escrow, according to Randi Bennett, an escrow officer at First Centennial Title Co. of Nevada in Reno.
- The purchase must close within 60 days after the binding contract deadline. In this context, that means June 30, not June 29, according to the Internal Revenue Service. The discrepancy between 60 calendar days and two months occurs due to a financial fiction that every month equals 30 days.
- Certain U.S. military, foreign service and intelligence service personnel have an extra year to claim the homebuyer tax credit. These buyers must enter into a binding contact on or before April 30, 2011, and close on or before June 30, 2011.
- Buyers should be upfront with their Realtor about their must-haves and their wish list, says Allyson Bernard, owner of Real Estate Professionals of Connecticut. Buyers who aren't realistic could find themselves up against the deadline with fewer houses from which to choose.
- Harsh weather may be a help or a hindrance, Bernard says. Buyers who are willing to trudge through snow to find a house may have an advantage over buyers who wait until the weather improves.
- Contract contingencies allow buyers some breathing room to take care of big items such as financing, inspections and the sale of their current home, Bernard says. But contingencies shouldn't be an excuse to delay once the deal is pending.
If you run into a problem and you no longer want to buy that house, it's great that you had those contingencies to protect you, but you may not have time to find another property, she says.
- Anecdotal reports suggest that some buyers have included a tax-credit contingency in the purchase contract. Whether that's a necessary protection to make sure the deal closes on time depends on the situation and local practices. Either way, buyers should read the contract to make sure the closing will occur before the deadline.
- Buyers should get preapproved for a mortgage, because glitches such as a mistake on a credit report or a lender's request for tax returns that must be retrieved from the IRS can cause a delay, says Patti Ketcham, owner of Ketcham Realty Group in Tallahassee, Fla.
You don't want to wait until the last minute, because you could end up shooting yourself in the foot over something that's no one's fault, but you just run out of time, she says.
- Buyers also should allow extra time in case the mortgage lender requires a second appraisal, which can delay final loan approval.
The appraisal process in residential lending is going through some painful changes. It is not uncommon to have a mortgage lender require more than one appraisal, Ketcham says.
- Buyers should line up homeowners insurance as soon as the house is under contract. Homeowners insurance is usually routine, but some states have special disaster-related issues. A big storm, earthquake or fire can trigger a moratorium on new policies.
- Buyers should be aware that short sales, in which the seller needs a lender's approval to sell the home for less than the loan balance, are typically subject to lengthy delays. For instance, one typical requirement is that the final closing statement must be sent to the bank for final approval. That can take five to 10 business days, Bennett says.
It's an unfortunate irony for homeowners who have experienced a financial hardship, but Ketcham suggests that buyers who want to claim the tax credit should set some firm deadlines or avoid short-sale homes.
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