By Geoff Williams, FrontDoor.com | Published: 9/14/2009
Step 4: Make the contract work for you
Some people, especially as June 30 drifts closer and closer, are going to find that the seller of the house simply can't move from the premises in time. Not a problem, says Decker, who recommends that your contract states that the seller agrees to close by June 30 "and can stay in the house under an extended use and occupancy agreement."
He adds, "We normally ask the seller to pay the buyer's carrying costs -- mortgage interest, taxes, insurance and utilities -- from closing date till possession is given. This can often work and results in a situation where the buyer gets the tax credit, and the seller does not have to vacate before he is ready."
Step 5: Be prepared for when you file your tax return
If you don't think about it now, you may well forget, cautions Torelli. "We print out the 5405 form and give it to our clients and tell them they'll have to include this with your tax return. It's not like you just get the tax credit. You have to file for it."
Then Torelli sounds rueful: "You just know that there will be thousands of people who won't file this form, that they'll forget or nobody told them about it."
Step 6: Don't force it
Ticking time bomb analogies aside, buying a house isn't like buying a pair of socks.
Not that that's a newsflash, but it should be said. If you don't like your socks, you can probably return them. If you don't like your home, there is no customer service desk for a homeowner to lug and exchange their ranch house with an attached garage.
So better to buy a house you love on July 2 and lose the tax credit, than buy a house you hate on June 30, but get the tax credit.
Brian Mikelbank, a professor of urban studies at Cleveland State University, puts it this way: "The first time buying process, especially in this market, is not one to be rushed. The market is going to be full of 'deals,' many of them bad ones."
He also observes that you should especially be cautious if you're buying a house that's gone through the foreclosure process. "These properties are worth a look, as compared to the foreclosed properties sold at an auction, because the time-pressure is removed. You'll be shown these houses by an agent, just like any other house."
That said, Mikelbank adds that if a house was lost due to nonpayment, and it didn't sell at a sheriff's sale, then "no one wanted the house either. There might be a reason for that."
Valerie Torelli, founder of Torelli Realty in Orange County, Calif., also points out that considering all the closing costs involved in buying a home, $8,000 is not worth the risk in rushing into a property you're not happy with and might end up re-selling (which would require additional closing costs).
So as you proceed quickly, also proceed cautiously. Purchase your dream house before June 30, and you'll have saved a significant chunk of change. Buy into a nightmare home full of leaks and creaks, and you may lose far more money than you stand to gain.
NEXT: See steps 1-3 of taking advantage of the FTHB tax credit >>
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