Fed home tax credit ends, state program begins

April 30, 2010 12:00:00 AM PDT
The federal tax credit for home buyers expired at midnight on Friday and was sure a busy day in the real estate business for folks trying to beat the clock.

LL Young worked late on Friday, as did the other agents at his Prudential real estate office in Oakland. They all had deals to close before midnight. Waiting a minute longer would cost their clients $8,000. That's why Young planned on hand delivering the contract on Friday night.

The Oakland agents estimate they have sold about 10 houses each because of this incentive. The deal Young closed Friday night will put a young couple in a condo in Concord, just in time for the arrival of their first baby.

"The federal government is doing what they can do at this particular time to help stimulate the economy, to put people in a position to purchase and keep the economy going," said Young.

Bay Area real estate agents said they had certainly noticed the frenzy of people trying to cash in on the final hours of the benefit. Cherie Colon with Windermere Silicon Valley Properties says she has been working with one buyer for two days to execute a contract in order to make the deadline.

"I just got the contract back from the sellers two hours ago and we are now pending and the buyer will get her tax credit," said Colon.

That extra motivation was also good news for the Kraing Family of San Jose. They are sellers, but the federal tax credit is still helping. Chuck Kraing said his son just put their home on the market on Tuesday and the response was overwhelming with four potential buyers in the house at one time. The result was Friday's pending sale to a buyer who wanted to close a deal in time to get that credit.

"I was expecting this to be a long hard slough and I was really surprised it happened so quickly," said Kraing.

Karl Lee, the President of the Santa Clara County Association of Realtors, does not think the credit expiring will slow housing sales.

"Buyers are more interested in low prices and the low interest rates; there is more concern that interest rates will inch up and prices are already going up," said Lee.

Just as the federal tax credit expires though, a new state program kicks in. A homebuyer tax credit signed into law in March becomes effective Saturday. There is $200 million available to first time home buyers and the buyers of newly built homes.

Colon said there are many more restrictions on this credit when compared to the federal credit. The $10,000 state income tax credit is spread out over three years and the process is more burdensome.

"Still, it is better than nothing," said Colon. "The problem is many industry experts expect the first time home buyer part of the fund to dry up quickly."


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