John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... First-time home buyers who want to take advantage of the $8,000 tax credit should have homes under contract in the next 10 days or so, if they want to be assured they can close under the current deadline for the program.
In order to qualify for the tax credit, a buyer must purchase the house before Dec. 1.
But the clock may be ticking faster than many qualified buyers realize.
Experts tell me that in order to be sure the home can be closed by the deadline, prospective buyers should allow 45 days for the buying process.
That means a prospective buyer should have the home under contract no later than Sept. 28, which is 45 business days until Nov. 30, the last day of the program.
“A year ago, I could close a loan in five days,” said Dan Brown, owner of Denver-based Spire Financial. “Now, witt the new Home Valuation Code of Conduct for appraisers, there is no way I can close a loan that fast. I need at least 20 business days.”
But he added he thinks prospective home buyers, to be on the safe side, should schedule 35 to 45 days from the time the house is placed under contract until it is closed.
Joan Rogliano, of the Rogliano Real Estate Group and Tim Smith, of Oxford Mortgage, on Thursday night held a workshop for first-time home buyers.
“Everybody needs to be prepared to to take a 45-day approach,” Rogliano said. “There is gong to be a huge rush and everyone involved in the home buying process – inspectors, title insurance companies, appraisers – are just going to be overwhelmed.”
Much like the cash-for-clunkers program that spurred auto purchases, the $8,000 tax-credit program is driving people to buy homes.
The tax-credit program is expected to cost about $15 billion, twice what was originally projected when the Congress passed the stimulus bill in February. The National Association of Realtors anticipated about 350,000 homes nationwide will qualify – that would translate to about 7,000 home sales in Colorado, based on the state’s population and homeownership rate.
Independent real estate broker Gary Bauer is estimating that 4,000 to 4,100 homes in the Denver metro area could be purchased under the program.
Both Bauer and the NAR would like to see the program extended, or even have the credit increased to $15,000 for all home buyers.
However, betting on a new or more lucrative program is a crap shoot. And Congress did not extend the cash-for-clunkers program, despite huge consumer demand.
“I’m working with a first-time home buyer right now, and I’m trying to get him to be under contract by Sept. 28,” Bauer said. “I don’t want him to be going down to the wire.”
Greg Nelson, a broker associate with the the Herman Group (formerly Prudential) in Cherry Creek, said that “almost 100 percent of my clients are first-time buyers,” planning to take advantage of the $8,000 tax credit.
“It’s really gotten some buyer’s butts off the fence,” Nelson said.
“Now, some of them are starting to panic,” about being able to find and close a home by the Nov. 30 deadline, he said. “More and more people are jumping on board. I can only imagine there is going to be a mad dash as we get closer.”
For some buyers, who want to buy homes with short-sale transactions, the ship has already sailed, unless they are far along the process.
“If you’re going to do a short sale, you have to plan it taking at least 90 days,” he said.
Most of his buyers have been snapping up homes from less than $100,000 to about $320,000. The vast majority of his buyers are in the market for homes less than $200,000s.
Mortgage broker Kevin Iverson said that the demand for low-priced homes makes it even tougher to close a home in time for the tax-credit deadline, which is another reason why anyone thinking of buying should begin house hunting immediately.
“Every real estate agent I talk to says there is a lot of action – the great majority of it, in fact – is at the lower-end,” said Iverson, of Reed Mortgage Co. “So there is a very, very short supply of good, move-in houses priced in the $200,000 range or below. These home are seeing multiple offers, and buyers who are kind of messing around on the price, lose the property. I would say if you find a house that you like, pull the trigger. First-time buyers have got a deadline coming up. If you really want to be safe, I would prepare for a 45-day closing.”
If I was a betting man, I would bet there will be some form of extension for the First Time Buyer Program. Additionally, I think there will have to be an increase in Conforming Loan Limits. For Denver $417K is just too low. The real weakness in this market now is $500K and up.
[...] week, I blogged that first-time home buyers should place homes under contract sooner, rather than later, if they [...]