With the slated expiry of the first time home buyer tax credit set for this summer, many Boise real estate observers are eagerly waiting to see how things will turn out after it is gone. Many real estate professionals are reporting a rush in buyer activity in an attempt to secure their tax credit before the contract date in April. As buyers learn more and more about just how this tax credit will affect them they are eager to take advantage of it. Here are a few guidelines that most people do not know about it.
Boise real estate first time home buyers tax credit deadlines!
- Contracts for homes that are going to claim the first time buyer tax credit through the purchase of Boise real estate are set to be accepted no later than April. This is to allow many people to use their IRS tax credit to assist them in paying closing costs and any other pre-paid they want to use when buying their home. As this deadline approaches many buyers will seek to cash in just in case the tax inventive is not renewed past its established time frame. After it was extended last year, many buyers felt like they bought before they otherwise would have, consequently many buyers are reluctant to buy at this time, as projected depreciation may be between 10 and 15 percent without the tax incentive in place for the remainder of 2011.
- The closing deadline is in June, which means that any home buyer who contracts Boise real estate by the April deadline can drag out their closing date until then. What purpose this serves is not clear but sometimes buyers using 1031 exchanges or 401k's to supply their down payment do need the extra time to get all of their funds together. It may seem strange that the deadline for closings falls in the middle of the summer, but housing professionals in the government expect the buzz generated by deadline will help buoy the rest of the sales season through the fall.
There are a few factors which have to be weighed in before you decide to take advantage of the first time home buyer tax credit to purchase Boise real estate. These issues are paramount in deciding when the proper time to buy is, and in this market that is vital to avoid getting trapped in a depreciating market.
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Increase in mortgage rates coming early this summer
- In order to avoid inflation and keep the economy at a reasonable pace of growth the Federal Reserve is scheduled to release a request to increase the rate early this summer. This, as always, will put a damper on home sales and prevent many buyers from purchasing a home within their means. For Boise real estate buyers, this means that looking for land or homes that are "owner carry" or "seller carry" may be the best option, since owners are less fickle about credit scores and interest rates when it comes to making money on their real estate.
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Depreciation after the expiration of the tax incentive
- What this means is after the federal government declines to extend the tax credit another year, many homeowners who purchase this year may be in for a tough period of time due to projected depreciation of 10-15 percent immediately following. This depreciation would all but nullify the tax credit for many homeowners and may even put them underwater in a home they just barely purchased. Don't get me wrong, long term they will be fine, but life frequently is not lived in the long term. If a new homeowner has to sell and get out of town to a better job offer, then they may have to come out of pocket several thousand dollars to do so, or, even worse, may be forced to execute a short sale or foreclosure simply to get on with their lives. For many Boise real estate buyers this presents a quandary that doesn't invite too much action on their part.
I don't mean to sound like Chicken Little because I do not think the sky is falling, but it has never been more important to hire the most experienced and educated real estate professional in history, so take your time in interviewing them before signing. I hope this information is helpful and guides you to a safe transaction in your purchase of Boise real estate. As always, I am available by email or phone to answer any questions email me here or 208-639-2089.
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