By Dawn Wotapka
Time is almost up on the federal home-buyer tax credit, the government’s gift of up to $8,000, crafted to jump-start a stalled housing market. Just about six weeks remain for buyers to get those contracts inked. Home builder Lennar has a bright countdown on its Web site. “TIME IS RUNNING OUT,” warns KB Home (yes, it is in all caps), which is tracking the expiration to the millisecond.
For those just now getting into the market who want the cash, “you’re going to have to move quickly,” says Walter Molony, a spokesman with the National Association of Realtors, one of the trade associations that pushed hard for this credit and its two extensions in February and December 2009. “You’ve got to be prepared to make quick decisions.”
In honor of the countdown, here are six things to keep in mind:
- This round is actually an extension, but it doesn’t just cover first-time buyers. Move-up buyers are also eligible, though they only qualify for up to $6,500.
- Only the contract has to be signed on or before April 30. The home purchase must be completed by June 30. Real-estate experts advise signing the contract as soon as possible and leaving plenty of time for closing, given lenders remain extra careful these days. Don’t try to squeeze in a July 1 deal. It won’t work.
- The definition of a first-time buyer isn’t as limiting as the words indicate. In this case, the “buyer” hasn’t owned a principal residence in three years. For married taxpayers, both parties can’t have owned.
- It might seem genius to “buy” a home from your parents, but skip any such notion. You can’t purchase a home from most family members: Parents, children, grandparents and grandchildren are excluded.
- Consider that prices might fall after the credit expires: Buyer traffic will undoubtedly decline once this enticement goes away. As sellers adjust to this slower new reality-they’ll be more than likely to shave prices.
- Of course, there’s talk of another extension, given housing’s recovery remains choppy. (Mr. Molony says the NAR isn’t advocating for a third round.) Some think the time has come to end the program. Mark Zandi, chief economist at Moody’s Economy.com pushed to extend the tax credit last fall but he said last month it’s time to let it expire. “It’s worn out its benefit,” he said. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”