…if you’re a so-called tax-credit buyer also looking to have the protections of home inspection(s) and/or financing contingencies when you buy.
As I write, today is April 28th. We officially have today, tomorrow, and the next day as the final days in which folks can take advantage of the about-to-expire homebuyer’s tax credit (up $8,000 for first-timers & up to $6,500 for other buyers).
But, here’s the rub…in writing an offer on a home these last couple of days that includes inspection and/or financing contingencies, you might end up with a tough choice to make. Should either the inspection or financing not work out as well as you’d hoped, you could be stuck between getting Uncle Sam’s cash or being “forced” to accept the home in a non-ideal situation.
Here’s a scenario: You searched for a home for a couple of weeks, narrowed your list down to two or three homes, & you write an offer on your favorite on April 29th. The sellers counter-offer on the 30th and you accept the counter. AWESOME! You’re in just under the wire, getting a whopping $8,000 IOU from the feds – Life is great! However, the home inspection on May 5th reveals a cracked heat exchanger in the furnace, a seriously mis-wired circuit breaker panel, and a series of minor plumbing leaks.
What do you think the odds are of the sellers willingly repairing those items if they believe you’re a buyer incentivized by the tax credit? They know that if they refuse to make the repairs, you’ll either have to accept their refusal or nullify the contract, going back to the market after the tax credit has expired. That’s not to say all sellers would be buttheads about it - but they could. Uncle Sam won’t be granting you any do-overs on May 8th should your original contract fall apart.
The same danger goes for financing, in fact that could be more devastating. Say you make the offer on the home believing you’ll be getting a 30 year martgage at 5.25%. Were it to jump to 5.75%, and you didn’t account for that possibility, you’ll be making another hard choice. On a $150,000 loan, a half point interest rate jump will cost you nearly an extra $50 per month on your payment and $17,000 in interest over the life of the loan.
My advice is that unless you are a cash buyer with no inspection contingencies, it’s best to wait until after April 30th to make that deal. Plus, with the expected slowing of activity in the overall market, those buyers which are out there will likely be getting better deals than those who bought before May 1st. As demand diminshes, pressure will shift back to the sellers to make good deals…
Am I alone, as a Realtor, in this sort of advice? Not completely…see Here, and Here, and Here.
Will the expected slowdown in activity effect the Dubuque market as noticably as in other communities? Probably not, but there will certainly be a change in the market’s mood starting May 1st. And the buyers will again have better leverage on first negotiating a good deal and then working the contract, via the inspections and financing, to terms that are in their best interest.
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