Home Buyers Who Missed 8,000 Dollar Tax Credit Coming Out Ahead

June 30, 2010 (rismedia.com)

Home shoppers who missed the April 30 deadline for a housing tax credit might have the last laugh. For a variety of reasons, they could end up saving more than the $8,000 they could have received from the tax refund.

In some neighborhoods and price ranges, sellers are dropping their prices because buyers are harder to find now that the credit has expired. Builders and real estate companies began offering promotions after the tax credit ended that, in many cases, are worth more than the credit.

Home sales leapt in March and April during the waning weeks of the credit, especially for homes priced at less than $200,000, which appealed to first-time home buyers. Since the credit expired, home contracts and building permits have tapered off, leaving sellers with fewer buyers and, in some cases, little choice but to cut their price.

Real estate companies are also getting into the act. To compensate for the vanishing tax credit, Coldwell Banker launched its Buyer Bonus Program that awards up to $8,000 back to buyers from participating sellers.  “At the end of the day, we don’t believe the tax stimulus will put us any further ahead than we would have been otherwise,” said Jerry White, executive vice president with Coldwell Banker King Thompson.

Finally, interest rates have dropped nearly half a point since the end of April, saving buyers thousands of dollars over the life of a loan. Buyers of a $180,000 home who borrowed $173,700 in mid-April at an interest rate of 5.125% would have paid $377,442 over the next 30 years—$15,000 more than they would pay if they borrowed last week at an interest rate of 4.75%.