According to a report from the Internal Revenue Service more than 1.4 million Americans have cashed in on their $8,000 tax credit and bought their first home. The figure doesn't say of those 1.4 million how many qualified for the full credit, however, this credit has proved to be much more valuable than the original $7,500 tax credit from the previous administration.
The $8,000 1st time home buyer tax credit has become an important tool in stimulating not only real estate sales but many sales transactions that affect many businesses and independent contractors because it is completely refundable allowing many to purchase furnishings for their homes, pay for closing costs, renovate a bathroom say, or apply the credit to pay down debt.
New tools available for buyers such as this new IPhone
APP provided by zillow.com to search for recent price reductions.
In a typical real estate transaction there are about 14 service professionals involved that all benefit from a sale. Not to mention the other service professionals involved from the seller's transaction as well. From a real estate attorney to the appraiser, from a moving company to a lock smith - many benefit.
Real Estate advocates including the National Association of Realtors, are urging Congress to extend the tax credit and make it available to all new home buyers in an effort to keep momentum going. According to CNN money there are 6 proposed bills in front of Congress that if passed would extend the tax credit.
While the tax credit has helped some markets stabilize, some economists predict that if the bill isn't extended it could soften the market when it's over.
On the other hand, if the credit is extended in the new year and becomes available to more Americans, then it's also possible that the real estate market could spike, causing depreciating real estate prices and under market value sales to halt and possibly rise.
On the mortgage side:
While the clock is ticking for first time home buyers looking to take advantage of this year's tax credit, FHA guidelines are becoming stricter making it more difficult for a home buyer to afford a home. New guidelines are set to take place November 1st after being pushed back from it's initial deadline of October 1st, so as not to put a roadblock for those looking to buy a home before time runs out.
In addition, appraisals can be an obstacle as well in closing real estate transactions. Because of current market conditions, some sellers have been forced to sell at prices slightly below market value to cause a sale. As these prices become recorded, appraisers and banks are forced to use the last - most recent sale - to appraise a home. Sellers will need to adjust their prices and buyers will need to be aware of this as well and adjust their offers accordingly.
It's unclear whether or not Congress will pass any of the proposed bills and extend the credit into the new year, and if so, it is also unclear as to what new restrictions will be in place for mortgage lenders. Therefor, it is important that your real estate agent is in tune to not only the real estate market but also has a good relationship with a reputable mortgage broker that is an expert in your area. Ask what guidelines you have to meet before shopping for a home and if these guidelines can affect your home wish list.
If you have a small down payment and are looking to buy a condo for example in the Hoboken real estate market, then time could very well be running out.
If you have 20% - 25% down and excellent credit, then you absolutely should be taking advantage soon. Whether it's for this tax credit or if another one comes on the scene. Sellers should fight over a buyer with excellent credentials if they are aware of the difficulties some buyers face in securing a loan today.
Bottom Line: Decide soon if this is your time to buy a home - then go for it.