Time's running out for first-time homebuyer credit

Krisely Regalado peered into the dim bathroom on Wednesday as her husband, Jorge, stretched a metal measuring tape across the bedroom floor of a Green Run townhouse.

Six months ago, encouraged by the combination of falling prices, low mortgage interest rates and an $8,000 federal tax credit for first-time home buyers, the couple began searching for their first home.

The small two-bedroom unit is the latest of nearly 40 properties the Regalados have viewed since April. In recent weeks, however, their search has taken on urgency as the deadline looms for buying a home in time to qualify for the tax credit.

The credit expires Nov. 30. Buyers hoping to use it probably need to sign contracts by mid-October to ensure a closing date before the deadline.

Signed into law in February to help prop up the ailing housing market, the credit so far has been used by 1.4 million taxpayers, the Internal Revenue Service reported last week.

Its popularity is driving home sales in lower price ranges, local experts in real estate say. Some homes priced at less than $200,000 have fetched multiple bids in recent weeks, said Marina Reznik, an agent for Exit Realty Central in Norfolk.

The National Association of Realtors wants the tax credit extended - and expanded to $15,000 and made available to all buyers, not just first-timers. Such a bill was introduced in Congress by Sen. Johnny Isakson, R-Ga.

Currently, the tax credit is available to first-time homebuyers or any buyer who has not owned a principal residence for three years.

"Frankly it took awhile for the public to understand it and use it," said Barbara Wolcott, president and CEO of Prudential Towne Realty. "I hate to see that momentum die down at this time of the year. Seasonally, the market slows anyway. It would be absolutely wonderful if we could use this to get entry-level buyers in the market."

The tax credit is most likely benefiting buyers who were already considering purchasing a home, said Greg Grootendorst, an economist with the Hampton Roads Planning District Commission.

"It's a value judgement," Grootendorst said. "Whether it's $8,000 or $15,000, all it does is move the line. People who weren't even thinking of buying a home probably still won't buy anything."

Many first-time homebuyers who have been looking for several months have started to pull the trigger in recent weeks, said Ron Foresta, president of Rose & Womble Realty Co.'s resale division.

"We're not encouraging people to wait," Foresta said. "If the government decides to extend it, if people are waiting for something bigger and better, I wouldn't advise it."

Reznik said she's had several clients who plan to put off buying a home if they miss the deadline.

Lured by the tax credit, Laura Aldana and her husband, Brandon Hooker, began their house hunt a week ago. While the couple has looked at pictures of about 30 homes online, so far they've visited only one.

"It's a short window," said Aldana, 21. "I pretty much have just a few weeks."

The couple is looking for a home in Virginia Beach or Chesapeake that costs no more than $200,000 and is convenient to Aldana's job at a spa near Virginia Beach's Town Center.

Natalie Vlk, their agent with William E. Wood and Associates, has been scouring

the multiple listing service to find homes that can close quickly - meaning no foreclosures and no short sales, which is when the seller offers the home for less than the lender is owed.

Because they require the lender's approval for the transaction to go through, short sales typically take as long as three months to complete.

"If someone is looking at a short sale, I'm telling my clients there's no guarantee they'll make the deadline," Vlk said.

For the Regalados, the tax credit and low interest rates were just enough to make the math work. The couple has rented a two-bedroom Virginia Beach apartment for $779 a month for the past three years and initially had planned to save about $6,000 before looking to buy.

"I just didn't want to be that person that buys a house, and then it's going into foreclosure because so many things went wrong," Krisely Regalado said.

The couple initially qualified for a Virginia Housing Development Authority-insured loan that would allow them to purchase a home for as much as $150,000 with no down payment. After they visited numerous homes in that price range, the lender reconsidered and reduced their limit to $110,000.

"The difference in the quality of homes in those two price ranges is pretty big," said Krisely Regalado, 22, who works as a receptionist at an auto finance company. "We're pretty limited now with what's available."

The couple's primary concern is finding a home near a good school for their 3-year-old daughter, Angie.

Wednesday evening was the couple's second visit to the 1,000-square-foot Green Run townhouse. They had toured it a few weeks earlier but ruled it out because it seemed cluttered and cramped.

Reznik, their agent, convinced the couple to take a second look at the $108,000 property after the owners moved out and the unit was cleaned.

Jorge Regalado, 27, a construction worker, measured each room to determine if the couple's furniture would fit, while Angie played at his feet.

"It looks a lot bigger now," Krisely Regalado said. "I like this one a lot more now, and the price is right."

In order to make the deadline, the Regalados plan to view a couple of more homes before bidding for one of them. They've been outbid twice for other homes.

"It's so stressful, because you want the tax credit," Krisely Regalado said. "It's an incentive, but it does rush you."

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com