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August 19, 2009

The clock is ticking on the $8,000 tax credit

Determined to get the $8,000 tax credit for first-time buyers? Keep in mind that the Nov. 30 deadline isn't about signing a contract -- you need to get to closing no later than that day.

So says the IRS, which specifically uses the word "close." This matters because you'll want to allow at least 30 days -- and probably more like 60 -- for a normal transaction to go from contract to closing. Even if there's nothing unusual about the home you're buying, you could find yourself delayed by issues relating to the loan, the appraisal, the home inspection -- you name it.

That goes double if you want something more complicated, such as a foreclosure.

What if you're having a home built for you? The IRS says you have to be physically occupying the place by Nov. 30. More Q&As here. (Personal finance columnist extraordinaire Eileen Ambrose has also done a number of Q&As on the credit at the Sun's Consuming Interests blog.)

Some real estate sites, wanting to remind you that "now is the time to buy," have countdown clocks. (This one at the Maryland Association of Realtors webpage, for instance.) Where we stand as of this second: 103 days, 18 hours and 0 minutes, accounting for the extra hour we'll get Nov. 1.

Do you feel the pressure? Or do you have a "whatever will be will be" philosophy on the credit? (Or perhaps you're purposely waiting until the credit's gone?)

The Wall Street Journal, sounding a cautionary note, profiles a first-time buyer who recounts all the things he did wrong in the rush to get the $8,000. For instance, getting into a bidding war on a foreclosed home he saw only briefly, and not "taking into consideration taxes, homeowners' association fees, and the cost to fix up and maintain a distressed property."

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (7)
Categories: First-time buyer tax credit
        

Comments

$8k is a relatively small amount when you consider how expensive real estate is (price, closing costs, taxes, front foot, etc.). It's a nice bonus, but I don't see the need to get all in a rush to get it. You'll wind up wiping it out in a bidding war. Housing is still weak so I think we'll see an extension or new tax credit show up around the time the current one expires. If it isn't extended buyers will get it anyway due to a lull in sales forcing more price drops.

I agree with BigDragon - it's very likely to get extended. Otherwise we'll see another slow market and, as a consequence, drop in prices, which will far exceed $8K.

I agree. The systemic damage of not extending the credit will outweigh the cost, though I wouldn't be surprised if it extends beyond first time buyers IMO.

I agree it will be extended too. Why stop now? We need to make sure we completely give away our kids and grandkids future so people like little debbie can continue to indulge. I say we go for the recently proposed 15k tax credit for any and all sales. Agree, debbie?

The tax credit is not a big factor for many because of the income requirement. If you make over ~95k, you can't use it. That doesn't make a lot of sense to me.

haha, i like the comments Darwin. An even better idea is to pay of everyones mortgage so they can have more money to spend. Who care about a deficit right? Let's run that bad boy up like a no limit credit card. Obviously, I'm being sarcastic. The tax credit has done a lot to help sales, but I worry about people that are using the credit to get a house they probably can't afford in 12 months.

I would not bet on the credit being extended. Just as Cars for Clunkers is out of $ the govt and public at large are over any incentives. In Baltimore region - yeah $8K is not alot but what you forget is that alot of areas are ALOT cheaper. And you get a 10% credit up to $80K. If you buy a $150K house thats over 5% of purchase price back to you. Or you can look at it like a free years mortage payments on that $150K house (roughly).
I am closing mid-October and will welcome th $8K next year. And - I owned 4 houses in Baltimore - but sold the last one in July '06 and have rented since. So, I am considered a 1st time homebuyer for the purposes of the program. I just got lucky with the timing.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie
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