Active Rain April 16, 2010

Tax Credit Deadline Makes Early Due Diligence Crucial

One of the things we all dread in a transaction is an 11th-hour problem that delays or cancels a closing until it is solved. It could be a certificate of occupancy for a deck or addition, an open permit, or an unknown lien. When these things are discovered, it causes mad scrambles to get the code inspector out to sign off, an expensive rate lock extension, or dicey living arrangements for people who have given notice to a landlord, just to name a few problems. However, the stakes are now even higher: it could cost the buyer their $8,000 tax credit.

If you are purchasing a home right now, you should make sure that the title report is run and that the building department file is checked. That way, you then have 75 days from today to handle any problems that may exist on the compliance or title of the property. Often, if there is an illegal deck or bath, you need time to apply, file applications, draw plans, get or close permits, or get the town inspector out without delaying the closing past June 30th. These things take time to address, and there may well be a glut of last minute issues all over your market area, with municipalities ill-equipped to handle a rush or spike in activity. 

In a perfect world, listing brokers would check compliance and title prior to listing a property, and buyer agents would double check assessor cards as part of their jobs as well. However, all too often they don’t. And it could cause a delay that extends the transaction past June 30th. 

Forewarned in forearmed. Run title early. Check out that property card at the building department. Ensure there are no surprise liens, illegal improvements, or other costly problems. Don’t assume! Smart work could save that $8,000 tax credit.