by Michelle Payne, Coldwell Banker Residential Brokerage
What buyers and sellers need to do now so they don’t miss out
With only three months until the $8,000 first-time homebuyer and the $6,500 existing homeowner buyer federal tax credits are set to expire, time is running out on an opportunity that buyers and sellers may never see again. The tax credit, which was created in mid 2008, expanded in January 2009 and extended again this past November, was designed to be a short-term incentive to drive buyers into the market. That’s why many 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 about 90 days. That’s about where we are now. For a buyer to be in a binding sales contract by April 30, and have the home purchase completed by June 30, they need to act almost immediately. That means this is also a prime opportunity for sellers. As the April 30 deadline creeps 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 credit. So for sellers who have been considering moving up in the market, downsizing, or relocating, now is the time to put that 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: There are an overwhelming number of markets where inventory is down, but even with a decline year over year, there are still plenty of homes for buyers to choose from.
- Interest Rates: Mortgage rates remain at all-time 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 here 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 you can do to speed up the process:
- Find A Qualified Real Estate Agent. A real estate agent will be able to help identify suitable lawyers, mortgage lenders, home inspectors and others who will play a role in making sure the buying process is 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. 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 verified your credit and other credentials and is committed 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. Upwards of 2.4 million first-time home buyers entered into the market in 2009. That’s close to half of all homes sold last year, according to the National Association of Realtors. 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.”
For additional information and provisions on the homebuyer federal tax credit, visit www.federalhousingtaxcredit.com, contact your local Coldwell Banker Residential Brokerage real estate agent or visit www.californiamoves.com.