I published this on one of my professional real estate blogs for other agents, but felt that it contained information that could be helpful and timely for the general public as well. Therefore, I am also posting it here on my public blog.
Not long ago one of the articles I read in a trade journal was discussing the $8,000 tax credit for "first-time" home buyers. This was back in June, and they were saying that for homes people were buying that were not yet built, it was almost too late. This was due to the fact that it takes so long from start to finish that they could likely not finish the home and close on the sale by the November 30, 2009 deadline.
Now we are rapidly reaching the end of August 2009. Homes yet to be constructed are now nearly an impossibility. Certainly a risk, if nothing else.
But here is my question. We have just slightly over 3 months left, assuming the tax credit is not extended, What about Short Sales?
Now we all know the royal pains these can be, largely due to the banks' lack of timely responses. I have seen some take as long as 90 days. Of course, this annoys the buyers and agents, can cost the buyers more in interest as rates change, completely mess up schedules for inspections and appraisals, and, if not the purchase agreement is not written correctly, leave the buyers with a binding contract that prohibits them from pursuing other more interesting properties. Not to mention that the banks will not promise what they will pay the agents for their hard and frustrating work on these deals.
So as we draw closer to the end of November, isn't it our responsibility to let the potential buyers of bargain short sales know that there is a new danger on the horizon? Many of them are depending on that tax credit money to help get them into that home. Here in Florida and Pasco County they have worked out a program so that the $8,000 can be advanced as a second mortgage at closing with repayment to be made once the credit is applied for and received. Suppose they find out on October 31st that the bank has rejected their offer? Not a treat, but a trick for them. Now, they have less than 30 days to find a home, do all the paperwork, and get it closed. That can be tough in even a normal market when a deal is not cash. I will certainly be telling my customers. If they want to continue, so be it. But I feel they need to be aware of the risks that could exist.
One also wonders if the banks' asset managers will use this impending deadline as a means to force higher prices on the short sale properties since they know that the buyers are up against a wall. Pay more now or lose the ability to avail themselves of the tax credit. One would hope the banks would "play nice" but considering what they are now doing to credit limits, etc. I would not bet on it.
I believe that this is an issue that we need to keep in the back of our minds for those buyers who are considering the purchase of a short sale property using the $8,000 tax credit. Hopefully it will be extended, but I would keep my eye on this situation if I were you. You could have some very unhappy buyers on your hands.
If you have any questions concerning this issue, do not hesitate to call me at: 813-783-4444 or e-mail me at: jelwell1@tampabay.rr.com
I always tell people, be well-informed consumers. That is more important today than ever before.
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