Time's a wastin' if you want uncle Sam's help selling your home. The home buyer's tax credit -- extended once by Congress, but probably not again -- is luring a wave of buyers into the market this spring. Here's the deal: Buyers can get back 10% of the purchase price of a home, up to $8,000 for first-time buyers and $6,500 for buyers who have been long-term residents of their previous homes. But to snag one of those buyers, you must prepare your home for sale, market it and sign a contract by April 30. The sale must close by June 30.
Is scrambling worthwhile? If last year's scenario plays out again, it definitely is. As the end of the tax credit loomed -- before Congress extended it -- home sales rose, and so did prices. The National Association of Realtors reports that in December the median price of all existing homes rose year-over-year by 1.5%. Sales rose by 15%.
Good timing will help sell your home in another way. The federal government's cheap-credit policy is almost at an end, and educated buyers know they need to get a mortgage before low interest rates begin to rise.
One factor working against you is competition from foreclosures and short sales (a home sale that's approved by the lender for less than what's owed on the mortgage). But those bargain-priced properties are expected to continue dribbling into the market, not hitting like a tsunami as they have in the past.
Even though these factors play in your favor, you still must have a clear strategy, like Steve Vieux. Vieux, 35, a lawyer with the federal government, formulated a plan when he was ready to move up from his two-bedroom, one-bath townhouse in Silver Spring, Md.
In October 2009, Vieux was ready to sell. He knew it was a buyer's market, but he had plenty of equity, and he anticipated the market would help him score a good deal on his next home. Within three days of listing his townhouse with agent Patricia Vucich, a first-time buyer offered the full asking price of $248,500. To help close the deal quickly, Vieux agreed to pay her closing costs even though she received the full $8,000 home buyer's tax credit.
Vieux quickly found and made an offer on his next home, a 15-year-old townhome with three bedrooms and 2.5 baths, also in Silver Spring. It was in move-in condition. The list price was $425,000. Based on the prices of comparable properties, Vieux offered $420,000 and asked for the sellers to pay $12,000 in closing costs. They agreed, and the sale closed in December. Vieux put down $40,000 and took a conventional 30-year mortgage with a 5% interest rate.