Do You Really Have Til November 30, 2009 To Benefit From The Tax Credit?

As I've reminded you of many times, the $8,000 First-Time Homebuyer Tax Credit is set to expire on November 30, 2009. I am not trying to beat a dead horse but in order to claim the tax credit, the IRS requires you to close on or before that date. December 1, 2009 is too late. But should that be the date a first-time homebuyer sets his/her/their calendar by?

I would suggest not targeting November 30, 2009. The biggest reason is that there are no do-overs. If you do not close by November 30 , 2009, you lose. If anything goes wrong, as is usually the case in a real estate transaction, you just missed out on $8,000. That's a pretty expensive oops! Making a problem more likely to happen is the fact that recently the County Recorder of San Diego County modified its recording guidelines to eliminate funding a loan and recording the Deed on the same day, except on the last day of a given month. Since every other first-time homebuyer is targeting that date there is a strong chance that many first-time homebuyers will be very dissappointed and wish they had the advance notice you are getting.

The optimal time for closing your home purchase just might be the week of November 16th to build in the proper cushion for potential delays. And the earlier in the week, the better. To further understand why, let's start with the fact that home sales volume is through the roof. New home sales data and existing home sales data have been very strong and first-time homebuyers account for nearly 1/3 of all transactions.

It is reasonable to conclude, threrefore, that with the combination of low homes prices, record low interest rates, and the $8,000 tax credit, buyer interest will remain strong all the way through the November 30, 2009 deadline. You should plan now to avoid the panic of missing out on the tax credit.

Now let's consider the calendar.

• November 30, 2009 is the Monday after Thanksgiving weekend.
• November 28-29, 2009 is a weekend. No closings on weekends.
• November 27, 2009 is the Friday after Thanksgiving; an unofficial holiday.
• November 26, 2009 is Thanksgiving. No closings.
• November 25, 2009 is the day before Thanksgiving; typically a "half-day."

So, that backs the November 30, 2009 first-time homebuyer tax credit deadline up by 6 days to Tuesday, November 24, 2009. That would mean that your loan has to fund on Monday, November 23 in order to record on Tuesday. That may workout okay for you depending on whether or not something goes wrong and how long it will take to fix the problem. With your closing date set for the week of the 16th you'll meet your tax credit deadline with plenty of time to spare.

This commentary may prove to be completely unnecessary if Congress extends the First-Time Homebuyer Tax Credit, but if Congress elects not to extend the tax credit it may save you $8,000. Good luck and happy house hunting.

$8,000 First-Time Homebuyer Tax Credit Extension?

On October 8, 2009 the House of Representatives voted 416 to 0 to pass the Service Members Home Ownership Tax Act of 2009 which extends the current $8,000 first-time homebuyer tax credit for another 12 months for members of the military, Foreign Service, and Intelligence Corps who served at least three months of qualified overseas duty in 2009. The current program is set to expire on November 30, 2009. In my opinion there is definitely justification for extending the credit to members of the military and the like because serving abroad for our country obviously makes it very difficult for those members to look for a house and take advantage of the program. At the moment the bill has passed only the House of Representatives so it is not law yet. But once the bill or some variation thereof passes the Senate it will be sent on to the President to be signed into law. As for the current first-time homebuyer tax credit, which is set to expire on November 30, 2009, there are discussions about extending the credit an additional six months. The problem is that there are several versions of the extension of the tax credit being proposed. The first, and most likely to pass, is simply the extension of the existing tax credit for an additional six months. However, there are proposals to extend the tax credit another year, to make the tax credit available to ALL homebuyers, not just first-time buyers and, lastly, to increase the credit to $15,000. While these other variations are fine to propose, the concern that I have is that they are a distraction from the real issue, which is simply extending the credit so that the momentum in the housing market continues. If the decision is whether or not to extend the existing tax credit then the answer is simply yes or no. What these other proposals do is take the focus off of just extending the tax credit and now create a whole new discussion and debate about whether these other proposals make sense. The $15,000 tax credit proposal has already been voted down in the past as was making the tax credit available to ALL homebuyers. This economy needs the momentum of the housing market to continue forward otherwise we risk undoing much of the progress that we have made due to the tax credit. The focus should be on 1) whether to extend the tax credit at all, and 2) for how long (i.e., 6 months or 1 year). I will keep you informed of any developments as I find out about them so stay tuned.