The Disappearing Time Table for the Home Buyer Tax Credit
August 20th, 2009
Categories:Real Estate News
Will you be able to find a home and close in time to receive the $8,000 tax credit?
Let’s look at the home buying time line and discuss some of the pitfalls you’ll want to consider before spending any more time sitting on the fence or gambling on short-sales.
What We Know:
- Tax Credit “expires” on December 1st, 2009
- You must close on your home by November 30th
- The IRS says there will be NO exceptions
- Rumors of next year’s tax credit have gone silent
Time Factors for Each Party in the Transaction:
Depending on who owns the home and what process they are using to facility the sale, will vary greatly from home to home. Here’s a breakdown of how long each major phase of the sales process takes. Take note of the never ending list of reasons for a short sale to be delayed.
Bank Owned | Foreclosure Homes
- 1 to 14 days to get an accepted contract
- 30 and 60 days to close
- All time factors depend on the bank handling the sale
Owner Owned Homes
- 1 to 5 days to get an accepted contract
- 30 days to close
- All time factors are somewhat flexible due to the reduced number of parties
Short-Sales
- 1 to 14 days to get an accepted contract
- 30 to 120 days to close
- All time factors depend on:
- Number of loans on the home
- Number of banks involved
- Who the banks are and their protocol
- Where the home is in the short-sale process
- The selling (listing) agent
- The homeowner
- The buying agent (yes, they can make a difference)
- The number of original contracts
- The number and value of subsequent contracts
- Currently political pull by the government
- The bank’s quarterly numbers
Lender Process (assuming you are prequalified)
- 30 to 60 days to underwrite and fund the loan after the contract is accepted
- All time factors depend on the bank’s volume of loans
- I personally know imortgage has dedicated a large amount of resources to guaranteeing a 30 days close. In this market, that is a powerful promise.
Realtor Process
- Currently there are no reasons why the Realtor’s paperwork process would slow down your closing.
- Working with a full time agent could reduce a day or more from the time it takes to get an acceptance
Summary of Time Factors
If you know what type of property you are considering, this breakdown will give you an idea of how soon you should submit your contract in order to have ample time to close and reach the deadline.
Buying a Bank Owned Home
- Bank: 31 – 74 days
- Lender: 30 – 60 days after contract acceptance
- Ideal Amount of Time to Close: 60 days
- Submit Contract No Later Than: Last Week of September
Buying an Owner Owned Home
- Owner: 31 – 35 days
- Lender: 30 – 60 days after contract acceptance
- Ideal Amount of Time to Close: 45 days
- Submit Contract No Later Than: First Week of October
Buying a Short-Sale Home
- Bank(s): 31 – 134 days
- Lender: 30 – 60 days after contract acceptance
- Ideal Amount of Time to Close: 90 days
- Submit Contract No Later Than: First Week of September
- Exceptions: In some instances Short-Sales can close in 30days, the listing agent will let you know if this is an option
Consider This:
Here are a few additional things to consider to help ensure your home closes on time for the tax credit deadline.
November Will Be a Crazy Month
With everyone trying to close on their home by November 30th there will be a lot of closings happening in November. You can expect title companies and loan processors to be overworked and exhausted. Which means you could see an extra two week delay in closing just because of the overwhelming amount of paperwork.
Give Yourself a Few Extra Days to Close
With everyone being in a rush to close a large volume of homes and loans, it is a good idea to buy yourself sometime to make sure there aren’t any typos. A small error on the lender or the title rep’s part could cost you a few thousand dollars. Make sure your Realtor is looking over the HUD statement to make sure it all looks right.
Common Questions:
When Will We Know about The Next Tax Credit?
I predict we will hear about the next tax credit either during November or two days after the November 31st deadline passes.
Why? Because that is when it will be too late for anyone to change their mind and it will be perfect timing to keep the housing momentum going.
What Will the New Tax Credit Look Like?
4 main rumors are floating around about the next tax credit:
- It will revert back to the original tax credit which was more like an interest free loan
- It will be the same as this year’s
- It will be increased to $15,000
- There will be no tax credit, because the economy is already starting to recover
Out of the four options, only two of them are options worth holding out for. Which means, holding out for next year’s tax credit could be a gamble and essentially there is only a 50% chance there will be a program available.
3 Quick Tips to Reduce Your Risk of Not Closing on Time
Skip the short-sales
- There are simply too many unknown factors that could prevent a short-sale from falling out of escrow last minute. That last minute fall out could cost you $8,000.
Play nice, kiss butt
- No one likes to be yelled and unfortunately closing a home in this market can be difficult and tempers tend to flair. Take the nice approach to whoever you are talking with you might be surprised how much further it gets you.
- Want to go a step further? Send your title representative a box of cookies with a note of appreciation. Just don’t forget to write your last name and future home address on box.
Communicate
- Help others avoid dropping the ball by staying in touch with everyone in the transaction to get a feel for what’s going on. You’d be surprised how many hiccups can be prevented with a little bit more communication.
Email us with any questions or comments!
Related posts:
- Time's Quickly Ticking for the $8,000 Home Buyer Tax Credit
- Current Workout Programs Accepted Most Banks
- What Closing Costs Do You Have to Pay for at the Closing Table?
- 5 Best Questions Asked When Buying a New Home
- Can I Pay Someone to Just Repair My Credit?