When the tax credit extension passed, home buyers drew a collective sigh of relief. You now have until April 30, 2010 to get a home under contract and until June 30, 2010 to actually close escrow. But guess what? It’s not as much time as you think! Here are a few good reasons to begin your home search NOW:
* This isn’t like cramming for a test. Purchasing a home is one of the biggest investments most of us will make and it deserves the appropriate amount of consideration. You need to check out neighborhoods, schools, floor plans and more. Do not assume you’ll find the perfect match if you start looking in March. You might make the deadline for getting a home under contract, but will it be the right home for you and your family?
* The 2009 tax credit worked. It brought out lots of buyers in our metro Phoenix market. That credit was set to expire on November 30, 2009 and buyers were trying like crazy to get something in escrow by mid to end of October in order to close by the deadline. That rush of buyers caused bidding wars on some homes. We saw bids more than $8,000 over asking price from people who wanted to take advantage of the $8,000 tax credit! Tie something up early, avoid the rush!
* The new tax credit has an additional feature, it allows up to a $6,500 tax credit for people who are NOT FIRST TIME HOME BUYERS. That means increased competition – more people in the market for the same homes. You might think that will also increase the supply if those move-up buyers are listing their homes for sale, but the truth is, they don’t have to, they can rent out their existing home, purchase another home and still receive the tax credit.
* Escrows don’t always close on time. Lenders and title companies were very concerned about how many closings could be jammed into the last few days of November to make the original deadline. If too many people are trying to close escrow on the same day, some will not make it. If the tax credit had not been extended, the closings that roll over to December 1st would not be eligible for the tax credit – a huge disappointment to buyers counting on that money. Give yourself buffer time, find a home early and get the closing scheduled for well before the deadline to allow for any potential delays.
* Some experts predict that interest rates will begin to increase sometime in the first 6 moths of 2010. Interest rates are incredibly low now, if rates creep up your buying power decreases, for example a purchase price of $150,000 with an FHA loan for 30 years at 5.25% interest rate equals a principle & interest payment of approximately $828. But if the interest rate increases even by 1% to 6.25% your P & I payment increases to approximately $923 – almost a $100.00 increase (* Please note, these payments do not include taxes and insurance which should each be quoted on an individual basis – please contact a mortgage broker for exact figures. If you don’t have one, call me for a recommendation).
* Be realistic about short sales. If you are considering purchasing a short sale, you need to be aware that it can take many months to get bank approval. You are at the mercy of the bank and you could miss the tax credit deadline altogether. The longer you wait the more you should consider traditional sales or bank owned properties.
If these reasons aren’t enough to motivate you to start looking now, call me. We can share more of our experiences with you! The National Association of Home Builders has a great webpage with more details on these programs - Click Here to View and be sure to check out the details of the tax credit and the income limitations.
Anyone who may be interested in home ownership in the next few years should be taking a hard look at this now. Prices and interest rates are historically low and a dollar for dollar tax credit is the icing on the cake. This is a “Trifecta” of home buying advantages – don’t miss out. “He who refuses to embrace a unique opportunity loses the prize as surely as if he had failed.” – William James.
Call me anytime – we are always happy to help!
Teresa Dempsey – Associate Broker, Keller Williams Legacy One Realty
480-634-7975 – Direct
