First-time home buyers are sold on tax credit
10/8/2009Blake Edington said it's a “no-brainer.” Barry Shaner calls it “the final incentive.”
“It” is an $8,000 tax credit for first-time home buyers and as a Nov. 30 deadline approaches for utilizing it, the tax credit is causing a surge in home-buying activity in the Toledo area.
“There's a lot of urgency out there. … A lot of first-time home buyers are just finding it hard to walk away from $8,000,” said Al Tinney, vice president of mortgage lending for the local region of Fifth Third Bank.
The tax credit, which began this year as part of the economic stimulus package, provides an $8,000 deduction to first-time home buyers or those who have not owned a home for three years.
About 1.4 million families have qualified to get the credit, including 48,671 in Ohio, according to the Internal Revenue Service.
To qualify, an eligible home must be purchased by Dec. 1, meaning the last day to close on the transaction, signing all the paperwork and paying the down payment, is Nov. 30. Given that it can take a month for a loan to be processed and paperwork to clear, buyers hoping to receive the tax credit are rushing to find a house, get it inspected, get a loan, and get to closing.
Joseph DiSalle, managing broker at the Maumee/Arrowhead Park office of DiSalle Real Estate Co., said the tax credit has been spurring heavier sales activity of late, but has been helpful all year.
“Right now, 51 percent of all purchases in the state of Ohio have been first-time buyers,” he said. “It was just 40 percent in 2008, so I think you can say there's been an effect.”
At Re/Max Masters real estate agency in Perrysburg, real estate agent and broker Jon Modene said all of his agents have been busy working with buyers to find homes in time to qualify for the tax credit.
“We've got a huge demand now for closing before 11/30 and it's really boosting sales right now. And why not?” Mr. Modene said. “An $8,000 payment at the table? You'd be crazy not to take it.”
Mr. Edington, 25, of Toledo, an information technology specialist, turned to Mr. Modene's agency to help him and his fiancee, Stephanie Raitz, find a house before the upcoming deadline. The engaged couple will close on a $150,000 house in Sylvania tomorrow.
“More realistically, we were looking at buying next spring,” Mr. Edington said. “But I think this was enough motivation. It just made me want to get it done. I mean, that's a really good offer. $8,000 tax-free? That's a no-brainer.”
He researched dozens of homes online and he and his fiancee toured six houses this summer and fall. Eventually, they moved up in price range, but the $8,000 tax credit allowed them to do that.
“Now we got a house that's quite a bit better. It's move-in ready. I don't even know if we're going to have to paint,” Mr. Edington said.
Barry Shaner, executive vice president of Directions Credit Union in Toledo, said his institution has done about 20 first-time home mortgages, out of 100 this year, specifically for folks interested in the tax credit.
“I can tell you that here we have had several employees that are younger who have bought [their] first home because of the tax credit,” he said.
“It makes the decision easier. If they're undecided, maybe that's the final incentive.”
Local lenders said as of now, the mortgage process is steady and still taking about three weeks to a month to process loans and reach closing. If more buyers start coming in seeking loans, that time frame could reach 45 days — meaning a week from now could start a critical countdown to make the Nov. 30 deadline.
Amy Johnson of SeaGate Inspections Inc. said the company's home inspectors have been booked solid all summer, and the traditional September lull never arrived. “We're swamped. We have six full-time inspectors, and we are scheduled 100 percent full for a week in advance,” Mrs. Johnson said.
“I would have to say maybe 70 percent of the houses we're inspecting right now are falling in with the first-time home buyer credit.”
Contact Jon Chavez at:jchavez@theblade.comor 419-724-6128.