Home sellers are a frightened group these days, alarmed by the very inducement designed to relieve their sleepless nights and jumpstart the residential real estate market. Since Labor Day passed, I have felt less like a real estate lawyer and more like a character actor in an awful horror movie, trying to figure out who the villains are, and how such a benign sounding benefit as an $8,000 first-time buyer’s tax credit could cause such dismay. Let me take you behind the scenes and explain the motivation of the main characters: A segment of first-time buyers have been prudent, tracking home prices and gauging job stability. Finally feeling comfortable enough to make offers on homes after a summer of uncertainty, they’ve calculated the (up to) $8,000 tax credit into their saving or spending plans for their first year of home ownership. Making offers to buy, they specify that closing should take place as soon as possible (meaning no later than the credit eligibility expiration on November 30th). A portion of sellers accepting those offers still reside in their homes; may have kids in school, might need to find a new place to live, and are possibly waiting for a contract in order to make arrangements to pay back less than the full amounts owed on their houses (commonly called a “short sale”). Happy (or at least relieved) to receive viable offers on their homes, the sellers are finally able to make plans. They tell their attorneys they’ll close as soon as possible (meaning as soon as they can arrange new housing or persuade their mortgage holders that the short sale proceeds are preferable to foreclosure proceedings). Are you hearing the discordant music growing louder in the background? In the summer, the Monday after Thanksgiving seemed very remote. But now, without any concrete extension of the tax credit on the table, first-time buyers sense their savings may be shrinking. They ask me: can they negotiate contract terms, arrange for mortgage financing, ensure sellers deliver clear title, hurdle the newest lender closing requirements, and still have a deed in hand in about 40 business days? And (cue the spine-chilling sound effects): Will I protect them by stipulating that the sales price should be dropped by $8,000 if sellers don’t close by November 30th? Sellers, panicked by netting thousands of dollars less at closing (or manacled by the constraints of a fixed short sale figure), are breaking into a cold sweat. They hysterically run from blocked doors to stuck windows, screeching as the other-worldly music morphs into monstrous moaning: $8,000 tax credit or the deal dies . Frantic sellers scream back at the looming buyer-beasts trying to snatch their last few dollars (or their sanity): Don’t kill the deal–I’m doing my best! I dread the last few frames of this horror movie. As I represent buyers over the next few weeks, my job is to ensure they receive the credit that persuaded them to jump into the home buying scene (even if they are now late to the game). On the other side, sellers hire me to guarantee them enough time to tie up loose ends and pay their obligations without penalty (even if months ago they were figuratively dying for a buyer). Will a champion rush in to save the day by extending the deadline, or will the crazed zombies bury more bodies in the real estate cemetery?
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