Housing Complex

Second Chance for First-Time Buyers, Part 2

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More tips for homebuyers interested in using the government's $8,000 tax credit, continued from this earlier post.

It’s not just for first-timers anymore. The tax credit needs a new name to do it justice. The National Association of Realtors is calling the newly passed version the “Extended Home Buyer Tax Credit 2009/2010.” But neither the media nor the IRS has figured out a replacement for the old terminology. Whatever they settle on, the credit now applies not just to first-time homebuyers but to a narrow group of existing homeowners who’ve lived in their current houses for five consecutive years (within the last eight). If you fall into this category and are looking for a replacement principal residence, a credit of up to $6,500 is available (up to $3,250 for a married individual filing separately).

April 30 isn’t your only deadline—it’s the deadline that drives all other deadlines. Weichert Realtors’ Lamont Miller, who has worked with 16 first-time homebuyers since the first credit was passed, immediately gauges new clients’ needs and alerts them to their many ticking clocks. If the buyers are purchasing a short-sale property, that’s extra time, though it’s often unclear exactly how much: “I have a client that went to settlement last Friday that purchased a property in Accokeek. They put the contract on that property back in early August, and the short sale got approved during the beginning of October.” Likewise, loans from the Federal Housing Administration (FHA) require extra processing time; the property must undergo a special inspection and appraisal, which can take up to 45 days, if a serious problem is discovered (example: the roof needs to be replaced). Some prospective buyers may want to buy a foreclosure property through the Neighborhood Stabilization Program (NSP), a wide-ranging initiative of the U.S. Department of Housing and Community Development that focuses on revitalizing neighborhoods overwhelmed by vacancies and foreclosures. That can also mean additional time-related complications. “For the NSP program you’ve got to take a course, and then you’ve got to get a lender who’s going to work with [the program],” says Miller. That can take up to 60 days. One aspect of the NSP involves grants to homebuyers, provided in the form of another tax credit—something Miller calls “a double whammie” for people simultaneously taking advantage of the first-time homebuyer credit. The grants are administered by local jurisdictions. In D.C. the Department of Housing and Community Development handles them; in Prince George’s County, the Redevelopment Authority manages the program.

The housing market’s less chaotic than it was before, but it is busy again. If you jumped into the boiling, boom-time market and decided “Whoa, too much for me,” you’ll be stepping into a very different—albeit still challenging—climate. Once upon a time, buyers had to drop everything to zoom over to open houses, make offers immediately, and hope for the best. Back in 2005, Coldwell Banker agent Atul Garg recalls literally being “camped out in the office until 2 in the morning, and I’d get in at 8. It was 24/7,” he says. “You’re cramming in every weekend, offer, offer, offer. Now, because there’s more inventory, buyers are taking longer to make their decision.” Of course, if you’re a first-time homebuyer trying to obtain that credit, you don’t have that luxury anymore. “There’s actually a dollar value attached to waiting now,” says Garg. And properties aren’t sitting like they were during the early months of the recession. The number of purchases in D.C. jumped from 409 in September 2008 to 552 in September 2009, with much of the growth occurring in condo sales. If 301 condos and co-ops sold in September 2006, only 194 did in 2008. But this year, the number bounced back to 274, much closer to the frenzied mid-decade numbers.

Image by Keeping it real, Flickr Creative Commons Attribution License

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