Time is Running out for the $8000 Tax Credit
The first-time homebuyer $8000 tax credit expires on November 30, 2009. If you fail to plan properly, you may jeopardize your ability to cash in on the benefit. Please consult with your attorney, accountant, lender and Realtor to address the process of closing on your home. Let's explore the factors that will affect the logistics and the realistic timeline in the month of November.
- November is a busy closing month in many markets and there will be a dramatic increase in the number of transactions due to the deadline.
- Most closings are scheduled at the end of the month due to pre-paid interest (so lenders can "service loans" at the beginning of the month), buyer's availability of funds and lease terminations.
- The "closing" is defined as the date the transaction is recorded in the Registry of Deeds (consult your accountant). In most states this requires a manual process by individuals waiting in line to process the paperwork. Don't anticipate that the Registry will "staff up" to meet the demand or extend their hours.
- Most loans require "funding approval" by the lender prior to recording the documents. Be aware of the time zones which can delay the process by 3-4 hours.
- The closing (signing papers) typically takes a minimum of one hour (if everyone is on time). Good luck in scheduling a morning closing time which is necessary to have enough time to record the documents.
So, we have effectively eliminated Monday, November 30 as a target date for closings. Weekends are not an option, so now we look to Friday, November 27, the day after Thanksgiving. Confirm with the title attorney, lender and the registry that they will be open and can conduct business. If they are, everyone will want a closing time on that day. Once again, good luck!
Since Thanksgiving is out, we look to Wednesday, November 25. This is the day before Thanksgiving and many companies work only a half day. However, a morning closing is a good option.
Since most title attorneys do not start the title work until a week or two before closing, you must allow for three business days to solve minor title and rate lock issues. This pushes the date back to Friday, November 20.
If you are a buyer and do not have a property under contract consider the following:
- Short sales should not be considered as it is highly unlikely that you will receive approval in time to close.
- Be careful purchasing bank owned properties as they have a higher incidence of title issues that could delay the closing past the deadline.
- Negotiate the closing dates with "time being of the essence" so that you have leverage for the scheduled date (consult an attorney).
- Be aware of the occupancy dates and the availability of moving companies in your area. You could consider closing earlier in the month and allowing a short term lease to the Seller (consult an attorney) if they will not move mid month.
- If you do not have a Buyer's agent, seek proper council to obtain the proper advice.
Now is the time to seek the advice of industry professionals and express your concerns about the deadline. Proper planning will insure that you realize the benefits offered in the stimulus package.