TAX NEWS - JUNE 2010

US Tax: Deadline nears for homebuyer tax credits

It's nail-biting time for Steven and Erin Stagnitto.

The Churchville couple signed a contract to purchase a 3,100-square-foot house in Farmington just four days before the April 30 deadline to qualify for a federal tax credit of $6,500 for repeat buyers. Now, they have to meet yet another deadline: to close on the purchase by June 30.

With 3½ weeks to go, what's at stake is a tax credit of $8,000 for first-time buyers or the $6,500 credit for those who are changing their principal residence.

"We're pushing as hard as we can to get deals closed," said Nothnagle Realtors agent John Masters.

Realtors and real estate attorneys are working overtime, scheduling night and weekend appointments.

For buyers looking to get in under the deadline, this isn't a time to procrastinate, said John Marchioni, real estate lawyer at Marchioni & Associates in Brighton. "They have to be so vigilant right now," he said.

That means getting information to loan officers and processors as soon as they ask for it, Marchioni said, and by being proactive, asking a mortgage officer, "Is it clear to close?"

"If you want this money, you have to do a little work," he said.

Some issues that may pop up that would delay or hinder a deal include the house not appraising for the sale price, questions about where a property line falls or credit issues, said Richard Sarkis of Nothnagle.

Now is not the time to be shy if you want your deal done by the deadline. "You need to call your lending institution at least once a week," Sarkis said, noting there may be bumps in the road to closing.

Among the factors he cited: Lending institutions have become much tougher when it comes to qualifying people for loans; the house you are about to purchase will be looked over by an independent appraiser, and if it doesn't appraise for the sale price, you and your Realtor may have to go back and negotiate with the seller.

To avoid a backlog, scheduling the closing as early as possible is a good idea, Masters said.

The Stagnittos scheduled their closing for June 21 or 22, trying to avoid a crush of activity on the last few days of the month. "We want to get through the closing process as early as possible," Steven Stagnitto said.

The tax credit was a major incentive for the couple to trade up. The family who purchased the Stagnittos' current home in Churchville closed on the deal early to ensure its own eligibility for the $8,000 first-time buyer's credit. The Stagnittos are renting their home back from the buyers until they close on the new house in Farmington.

Once you do close, Marchioni recommends filing an amended 2009 tax return to get the tax credit immediately.

Everyone is busy during this final stretch, said Christine Nothnagle, president of Nothnagle Home Securities.

"Whether it be lenders, attorneys, title companies, surveyors, all are trying to help customers receive their tax credit," she said. "The secret to success is to be in constant communication."

The tax credits have been a driving force in spurring the real estate market for the past several quarters.

The biggest impact came in the fourth quarter of 2009, when closings soared 23 percent compared with the fourth quarter of 2008 in the territory covered by the Greater Rochester Association of Realtors.

Closings rose an additional 9 percent in the first quarter of 2010.

The active real estate market has played a key role in keeping the Rochester-area economy healthy while many others around the country have struggled.