The current Home Buyer Tax Credit has a cut-off date of April 30th for first time and move up home buyers to have an accepted offer on a home to qualify for either an $8,000 or $6,500 tax credit. The purchase must then close prior to June 30th to qualify.

“Conventional” wisdom would then suggest that as of May 1st, people will stop buying homes. I do not think that this will be the case nor should it be.

Buyers still in the market on May 1st could encounter some great deals. Sellers thinking that because the credit is gone their home will never sell will panic. Expect prices to drop to compensate for the loss of the credit. You can also expect that sellers will look at and even accept offers they normally would not have prior to April 30th. So, rather than getting $8,000 back from the government (taxpayers like you and me), a first time buyer could negotiate an additional $8,000 off the price of the home in either discounts or pre-paid closing cost credits. This could have a better, long term effect on the buyer than a one-time lump sum of $8,000.

Home buyers in the upper ends of the market will also see a greater benefit than they would with the tax credit. Remember, there are income limits to the tax credit: $125,000 for singles and $225,000 for couples. At those income rates buyers won’t qualify – and, may never see the credit anyway as it may be absorbed by their income tax liability. But, this is not necessarily common knowledge among sellers and even agents. May 1st, sellers may also be in a panic and ripe for accept lower than normal offers from buyers.

Buying a home for most people is a life-changing experience and shouldn’t be predicated upon getting a rebate – we’re not talking about cars here! The best time for anyone to buy a home is when they are ready. Buyers should have their ducks in a row before making a purchase and completely forget about the tax rebate when it comes to making a decision.

$8,000 is no compensation if you are not financially ready to buy a home or if your job is on shakey standing. It should also not be enough to cause you to buy the wrong house just to get it.

If you are actively in the market looking for a home and nothing has come up, don’t panic. On May 1st, you might have advatages you don’t have right now.

Disclaimer: I am not saying you should definitely wait until after May 1st to make an offer on a home that you like. I am simply offering another way of looking at what the market will bring after the home buyer tax credit accepted offer deadline runs out. If you are financially ready to buy a home and have found a home you can see your self living in for many years to come, then go for it! (And call me if you don’t already have an agent!)

Posted in: Housing Market
Tags: buying a home, first time buyer, home buyers, income tax liability, tax credit, tax rebate