This question was emailed to me today and I thought it was a great question-
- Do to the increase of Foreclosures increasingForeclosure if we be patient are we more apt to save more than the $8000 tax credit. Are there better deals yet to come or has the market hit the bottom? and a link to this article was included - Foreclosure rate more than triples in Mesa County
Let me just start by saying "If anyone out there has a crystal ball I could borrow, I would greatly appreciate it. Please, Please, Pretty Please!!!"
I replied with the following:
- The only reason that I can foresee as to why you wouldn't get the tax credit is if you both made over $150,000 combined, and from there my understanding is that you will get a percentage of the tax credit. Your accountant could answer that question better than me and trust me he has been asked many times. You can view the specifics for the 1st Time Homebuyer Tax Credit here. Also, did you read this article from the Daily Sentinel yesterday( This is a very good article) - Bargains to be found in housing market? Another factor that you might not be considering is the interest rate. The Government has been purchasing mortgage bonds and they have recently announced that they are going to start tapering off from purchasing them. As this continues to happen there is a good chance the interest rate will increase. I have a very informative newsletter that I will forward to you (See my previous post, below).
Now as far as the foreclosure rate is concerned, you need to remember that most of these short sales are home owners who are trying to sell their homes and lose less money and hopefully avoid foreclosure. Therefore, a lot of those homes they are predicting as foreclosures are already on the market or the owners are in the process of working out something with their banks (aka "Making Home Affordable") Some of them have already been given the 90 day notice and some of them are either behind or almost behind on their mortgage payments and they are trying to get their home sold in order to avoid foreclosure. As we have seen, some of the sellers out there are making their payments, but can't sell their home for less than they owe. Yes, if these short sale owners don't sell their homes, there is a good chance they will get foreclosed on. Here is the thing to know. If they are actively trying to sell their home the bank will sometimes give them a break and allow them to become more than 3 months behind on their payments. Each foreclosure costs the banks a significant amount of money and they try to avoid spending it. Keep in mind that while all of this is happening the 1st lienholder has gotten an appraisal done and has a very good idea of what the home is worth. Therefore, before they agree to a short sale or sale it at foreclosure they know the homes value and each bank has their own formula of how much they will accept below the appraised value.
My opinion on all this is that some of these short sales out there are pretty good deals. The market price on average is lower than it has been in a couple of years and these short sell homes have the owners and the banks willing to take some good deals. The home owners just want to be done and the banks want to avoid paying the thousands of dollars to go through the foreclosure process. There is a down side, and that is a short sale can take up to 90-120 days (some don't take that long, it varies) to be approved. It can be hard to be patient during this time. If someone comes in with a higher offer before the bank reviews your offer, their offer may be considered as well. Unless they extend the tax credit you will miss out on it, but you may have saved more in the process. I hope this has answered some of your questions, let me know if you have any more. Thanks!
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