If you are looking for a way to capitalize on the current buyers' market, look no further than this condominium at Brookwest.  The details:

Sale price: $100,000 or $104,500 including $4,500 in improvement allowances. 

Approximate payment with 0% down at today's rates: $770. (plus $200 condo fee for a total of $970). *many factors apply, so verify with a local lender.

Improvements needed: flooring, new refrigerator, bathroom modification (optional), interior paint (optional), deck maintenance (optional), exterior siding (will be completed by association in the spring - no special assessment)

Sale prices achieved in 2010 in the development: $125,000, $130,000
Top-of-the Market Price achieved (2006): $160,000

Potential equity after improvements:
25-60%.
 
 
The closing deadline for homebuyers who qualified for the $6,500 or $8,000 tax credits by putting property under contract by April 30, 2010 has been officially extended from Today, June 30, 2010 to September 30, 2010.
 
 


Has the incentive for first time homebuyers to break into the market just gone away?

My non-scientific market research has shown me that it has not. My buyer clients are still excited about the house hunting process, low interest rates, and attractive offerings at low prices – and I’m hearing the same from my peers. In fact, the drop in interest rates over the past two weeks has created a long-term incentive even more attractive than the first time homebuyer tax credit – and *bonus* - it’s not costing taxpayers a thing.

How does this work? Consider the first time homebuyer using an FHA loan to purchase a $200,000 property. For the first five months of 2010, when buyers were snatching up tax credits like hotcakes, the typical FHA interest rate was 5.25%. Over the life of their loan, a buyer who locked in at 5.25% would pay a total of $412,621.13 in mortgage payments (including principle, interest, and PMI – not taxes or insurance). Now, with the 4.5% FHA rate, that same buyer would pay a total of $380,994.95.

The post tax credit buyer will save $31,626.18 with the better rate, or $23,626.18 better than they would have done by going under contract in April, closing by June 30th, and collecting the $8,000 tax credit. The caveat, of course, is that their monthly savings only totals $87.85, so they would have to remain in their home for 7.6 years to collect $8,000 worth of savings. But after that, they’re doing better every month!

This should also give some condolence to those advocating for the closing deadline of the first time homebuyer tax credit to be extended to September 30th. Although I understand the argument for extending the deadline (to give time for new construction delays, underwriting logjam, and short sale H-E-double hockey sticks), I’ve been wondering all along if it’s the best policy. After all, my buyers who were looking to collect the tax credit had their options explained to them – and they knew upfront that if they chose a short sale or new build, or if they waited too long to get started, they’d be risking their $8,000. Some chose a safe route; others took a risk. Either way, they made conscious decisions.

My advice to those who haven’t closed yet? Consider your delay to be a gift, re-lock your rate, and enjoy the savings for years to come.