Taxing Dilemma for Home Buyers : Real estate: First-time purchasers face delaying closing to take advantage of Bush’s proposed incentives.

Chuck Baren and his wife, Renee, were supposed to close on their new Cheviot Hills home today, but they delayed the closing until next week in hopes of taking advantage of President Bush’s proposed tax incentive for first-time home buyers.

“The seller was pretty understanding,� said Baren, a lawyer who is buying the three-bedroom home through Fred Sands Realtors. “The tax credit could save us almost the full $5,000.�

First-time home buyers such as the Barens face an eleventh-hour buying dilemma this week in the wake of Bush’s proposals to stimulate housing purchases by offering a $5,000 tax credit to first-time home buyers and allowing a penalty-free individual retirement withdrawal of up to $20,000 for a couple’s down payment.

If passed, the incentives would cover homes purchased between Feb. 1 and the end of this year. Bush has challenged Congress to enact the proposals by March 20, but buyers may have to wait longer to find out the fate of Bush’s plan and whether it is altered by Congress.

Existing homeowners too must consider whether to put their homes on the market now or wait to see if Congress enacts other budget provisions that would lower the capital gains tax from 28% to 15.4% and allow a tax deduction for those who sell their home at a loss.

Real estate experts say the prospects of substantial federal incentives and tax cuts haven’t stalled real estate activity this week. But some real estate agents report that they are discussing how the proposals might affect their clients’ strategies, and a few are advising some strapped first-time home buyers to extend their escrows to see how the proposals fare in Congress.

“For some first-time buyers, the proposals may make a big difference,� said Ricki Weinburger, an agent at Jim Dickson Realtors. As a result, Weinburger said, she is advising some clients to consider making sure their escrow extends until after Bush’s March 20 deadline.

One of Weinburger’s clients, Los Angeles school teacher Helen Josen, said that as a first-time buyer she may need both her IRA savings as well as the $5,000 tax credit in order to buy a home. But Josen said that while she would like to wait and take advantage of any first-time buyer incentives, she is discouraged by a recent rise in interest rates as well as reports that some sellers “are less likely to come down on their prices knowing that buyers can possibly get a tax break.�

The first-time home buyer tax credit that Bush proposed would help an estimated 166,000 Californians who are expected to purchase their first homes this year, according to the California Assn. of Realtors.

But Michael L. Evans, national director of the Real Estate Advisory Services unit of Ernst & Young in San Francisco, believes that Bush’s proposed incentives “won’t have that much of an impact� in expensive real estate markets. He noted that a lender’s paramount concern in approving a mortgage will continue to be the buyer’s ability to maintain a monthly mortgage payment, not his ability to come up with a down payment.