Sunday, October 25, 2009

One month left to claim tax credit

From The Oregonian:

Boye Oshin is gambling with a bank to win $8,000.

The 24-year-old Intel engineer has tried since June to buy a three-bedroom Hillsboro home. But the seller is still waiting for approval from the lender who would lose money on the deal. The house is underwater with the seller owing more than it's worth.

Oshin, on the other hand, needs the deal to close by Nov. 30 to score an $8,000 federal tax credit for first-time buyers.

Can he make it?

That's anyone's guess.

Oshin joins a backlog of buyers trying to close a home purchase before the tax credit deadline.

Home purchases -- when there's not a single glitch -- can move as fast as a month from the date the seller accepts an offer to the date the deal closes. With the housing market in tatters and underwriters under pressure to scrutinize deals, most sales aren't moving that quickly. Most deals need 45 days or longer to close.

For those still hoping to get the credit, mortgage bankers and real estate brokers warn that buyers should have an offer accepted within days -- at the latest
The National Association of Realtors has estimated that about 1.8 to 2.0 million first-time buyers will use the credit this year. But of those, the group said, only about 350,000 are people who wouldn't have bought without the credit.

Based on the group's math, the true cost of the credit is not $8,000 per buyer. It's actually $43,000 per each net new buyer, according to an analysis by the financial blog Calculated Risk.
Rick McDowell, Oshin's real estate broker, expected the bank would decide within three months of making the offer in June. But they're still waiting for what the bank calls a "Phase 2" and final approval.

"It's a bureaucratic nightmare," McDowell said.

With weeks to go before the credit expires, Oshin reluctantly paid for an appraisal. If the deal fails, he'll have lost the $500 fee.

"When I think about potentially getting that $8,000, it's worth it," Oshin said.

The appraisal alone can take two weeks. New federal rules limit mortgage brokers' contact with appraisers. The goal is to prevent brokers from pressuring appraisers to issue a favorable report, but it also makes it more difficult for brokers to control how fast the work is done.

Emory, Oshin's mortgage banker, said: "He's going forward because it's the only chance he has of making it."
This isn't the first horror story about trying to buy a short sale. Most people who are racing the clock to get the $8,000 tax credit have passed on any 'third-party approval' properties because of the uncertainty involve. My guess is that Oshin will not get the home.