Closing Window

As you may know, the government is offering an incentive for first time buyers in the form of a tax credit valued up to $8000. I'm not going to go into detail on the program, but what needs to be said is this, the clock it ticking!

One of the things people don't know is that you have to close on your home before November 30, 2009 to receive the tax credit. I have heard people say "well I just need a purchase agreement before the deadline", ahh NO! You need to close on your new home, and be living on the property before November 30th or you can not file for the tax break.

I have been telling all my buyers that they need to buy before September if they have any hope of closing in October or first part of November. Because I am predicting that November will be one of the biggest real estate months ever!! Closing will be at a record high, and many folks will miss out because of it.

Why?

There are a few x-factors no one is talking about:

1. Starting July 30th the government is implementing Housing and Economic Recovery Act (HERA). HERA amends the Truth in Lending Act (TIL) making lenders disclose any and all fee before they are collected. This is a good thing, however, any change to the TIL within four days of close means that the transaction will have to wait an additional four days to close. What can change the TIL? Unlocked rate, change in loan amount, product change (change in loan type), rate re-lock due to market improvement, change in closing date, or changes to fees inclusive of settlement agent fees.

2. The other factor is the financial institutions themselves. The current backlog will only increase the waiting times to close in the coming months due to the increased volume. Meaning, as the tax credit is expiring, more first time buyers are going to buy looking to close before November 30th.

These factors are going to make November the craZiest month for closings this year. Therefore, I am telling all buyers, buy NOW! Don't wait for the backlog and miss out on the opportunity to cash in on this one time offering by the government. There is hope that the government may, may, extend the tax credit into next year, but that is not for sure. So far it is just a HOPE!

At one point there was some talk that you could borrow the tax credit upfront as a loan and pay it back when the credit is issued. We know that is happening around the country, but that will not happen in Minnesota. Why? Because the organization that could offer the loan can not offer it. Why? Because their bond is short funds to accommodate all the potential users. Simply put there isn't enough monies to go around. This is unfortunate because that would put even more people into homes that can afford to make the payments, but have a barrier to entry, down-payment.

My hope is we figure out more ways to incentivize buyers to continue to buy, however, the national numbers do not reflect this market. The five state region is holding up right now, and there is no signs yet to say different.

These are my thoughts, but offer me yours.

Follow my continues thoughts on all things real estate at www.twitter.com/edinarealty and I will post more updates. You can also find me at www.jasonmoore.edinarealty.com.