Recently a first-time home buyer asked me to recommend an optimal deadline for taking advantage of the extended tax credit. Although April 30, 2010, the deadline for both first-time and repeat home buyers to have an executed sales contract in place, this gentleman's question was very timely.
Pausing for a moment, I responded that, if I were looking for the best home at the best price, I would begin taking measures to begin the process by mid-December. The logic behind my reply derives from the ever-changing mortgage funding guidelines and procedures which can be especially tricky for folks who have never purchased a home. Additionally, in my experience, first-time home buyers typically tend to include family and friends in their home search and selection process. This takes time. If buyers take, on the average, 45 to 90 days to find the most desirable home at the best price, that could extend the time-frame to mid-February to late March. With settlements taking longer due to new legislation related to appraisals and Truth in Lending and Good Faith Estimate disclosures, buyers need to plan for 60 to 75 days from signing the contract to closing on their home. What this means is that settlement would occur sometime in April or May.
Although the settlement deadline is June 30, there are several other good reasons for buyers to expedite the process. Interest rates may or may not remain as historically low levels. Secondly, buyers, with the assistance of their REALTORS, need to assess the absorption rate of homes in the market at the time they are ready to place an offer. No one can predict whether the protracted Buyer's Market will continue through the spring of 2010. It's anyone's guess. However, by starting the home buying process earlier, buyers can monitor and adjust the timing of their efforts according to the local real estate market which they are endeavoring to enter. Finally, the knowledge that, on the average, 90% of purchase sales agreements actually reach the settlement table for a variety of reasons including information gleaned from home inspections,, cut appraisals, and "short sales," the savvy first-time home buyer will leave ample time to regroup and find another home in the event that the first purchase sales agreement is terminated or delayed.