I’ve been working with a lot of first time buyers this year. Many of them have been motivated by the $8,000 first time buyer tax credit that the government is offering. A good number of them have already closed on a property and are set to receive their refund next year when they submit their Federal Income Taxes.
Some of my buyers are still looking though. They are waiting for the right house. Or they found a house and it’s fallen through for inspection reasons, so they’re back out there again. As an aside, this is more common than you’d think; I have 4 buyers looking right now that are in this inspection situation.
Anyway, in order to take advantage of the $8,000 tax credit being offered this year, a first time buyer needs to close on that property on or before November 30, 2009. That gives us approximately 3 months remaining to find a property and close before this opportunity goes away.
Some buyers are asking me if I think there will be a similar program next year. I honestly don’t know. Last year there was a buyer incentive program, but it changed for 2009. I don’t know what next year will bring and if Congress will decide we still need this type of housing stimulus option.
Buyers are also asking me if they should buy this year, simply because of the $8,000 credit. I honestly don’t know that one either. Each person is different, so that needs to be assessed individually.
But what do we need to do if you do want to buy this year and be able to take advantage of the credit? Er, get moving! Closing on a property typically takes anywhere from 30-60 days. That takes into account how long it takes to get a mortgage processed, in addition to giving most sellers enough time to move on to their next place. Working backwards from November 30, that means you should have an accepted contract no later than October 1, 2009.
I would actually recommend trying to have something in place before October 1 though, for a few reasons.
First, mortgages have been taking longer to process recently due to stricter underwriting guidelines, particularly FHA loans, as well as an increased volume. I believe this is only going to get worse in the next few months as a slew of buyers try to jam in a purchase before November 30 and lenders continue to deal with more underwriting guidelines and leaner staff levels.
Second, home inspection issues could cause a delay or the deal to blow up, so you may need to start over.
Third, closing attorneys have limited capacity and good closing attorneys are going to find themselves slammed in November. People normally like to try and close at the end of the month (or the Friday closest to the end of the month) and this tax credit situation is going to only make it worse for November.
If you want to take advantage of the credit, I would recommend trying to close in the middle of November, or sooner, if at all possible. That way if you have problems with your mortgage, there is some wiggle room for you to still get the transaction closed before the end of the month. This would most likely not be possible if you’re scheduling a November 27 or 30 closing and there are issues. And how annoying would it be if you’ve planned to get everything done so you can take advantage of the credit and then you miss the deadline at the very end? Uh, very. So budget enough time if you can.
Happy property hunting!