As credit deadline approaches, race is on for first-time buyers

HACKENSACK, N.J. - First-time buyers are searching for homes with a growing sense of urgency, worried that time is running out on an $8,000 federal tax credit.

Real estate agents say they're seeing a surge of first-timers who want to close on a property by Nov. 30, the deadline for the credit. The rush has set off bidding wars and stirred up a normally quiet August market.

"We're inundated," said Paula Clark, an agent with Coldwell Banker in Hillsdale, N.J.

To meet the Nov. 30 deadline, buyers need to have a contract by around Sept. 30 because inspections, mortgage approvals and other details typically take about two months.

House hunter Stan Salazar of the Bronx, a 34-year-old assistant building superintendent, said that he and his wife, Marianela, were drawn into the real estate market mainly by lower home prices. But they'd like to close in time to get the credit, he added.

"Hey, $8,000 is $8,000," Salazar said, after touring an expanded Cape Cod  last week with real estate agent Sheldon Neal.

"It has pushed some of the buyers who have been watching the market into action," said Abby Ceres-Buda, an agent in Hawthorne, N.J.

While $8,000 may not seem like a big deal when you're talking about a purchase that typically runs $300,000 and up, it's enough to get some cautious home shoppers off the fence.

"It's not that much, you would think, but these are young kids starting out, so every little bit helps," said agent Annekee Brahver-Keely.

Michael and Jennifer Marino, who recently closed on a Cape Cod, said they were motivated less by the $8,000 than by the fact that they're expecting their first child. But the money will pay to replace a couple of aging appliances.

"That's furnace money and hot-water-heater money," said Michael Marino, a 34-year-old printer.

Ray Searles, a teacher who will soon close on a colonial in River Edge, said the $8,000 gave him and his wife the final push to buy a home.

"We'd been thinking about it for a year, and once we heard about the credit, we said, 'We're getting a house by December,' " said Searles, who now lives in an apartment. "It'll just go toward furnishing the house."

The starter home segment - under $500,000 or so - has been active since spring. According to statistics from the RealSource Association of Realtors, 1,897 Bergen County homes under $500,000 went under contract in June and July of 2009 - up 26 percent from the same period in 2008. At the same time, the number of homes going under contract above $500,000 declined 3.7 percent.

The tax credit is just one reason. First-time buyers are also attracted by lower home prices - down about 20 percent in the region from the market peak in 2006 - and mortgage rates in the 5.5 percent range. In addition, unlike trade-up buyers, they don't face the obstacle of having to sell a house before they buy.

Still, the approaching tax credit deadline has heightened interest recently among first-time buyers.

"I have five closings in August," said agent Roberta Whitley Gomez. "It's the credit. I think it's bringing a lot of people out."

"They're very concerned about losing the credit," said Maria Rini, a Re/Max agent in Oradell.

Harry Elias, an agent with Friedberg Properties, said he got a call recently from a young couple eager to start the house hunt, after watching friends buy their first home. They saw that completing the sale could take two to three months, and want to close in time to qualify for the credit, Elias said.

The influx of first-timers has led to multiple offers on houses in good condition. In addition, more properties at the lower end of the market are selling at or near their full asking price, agents say.

"In the $400,000 price range, we don't have a great deal of inventory of nice houses," Clark said.

Some first-time buyers, strapped for cash, are negotiating to buy short sales - in which a lender takes less than is owed on the mortgage to allow a distressed homeowner to sell. These properties are usually less expensive, but the transactions tend to drag on, as the bank considers the offer. Buyers who are enmeshed in some of these deals are getting nervous, hoping that the sales will close in time to let them get the credit.

"The last two short sales we were involved in, one was a six-month ordeal and the other was a seven-month ordeal," Rini said.

Other buyers have been trying to buy for several months, but have lost out as the competition heated up in the starter-home market.

"We've had bidding wars on some houses, especially in the $400,000-$450,000 range," said Jeana Cowie, a Re/Max agent.

Now they worry they won't be able to find a place and close in time.

Agent Ivana Crecco recently worked with a couple who were outbid on houses twice before finally succeeding with a home in Paramus. They expect to close at the end of September - in plenty of time to qualify for the tax credit.

(c) 2009, North Jersey Media Group Inc.

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