The homebuyer tax credit closing deadline has been extended until September 30th, 2010 for those who were under contract by April 30th, 2010. Details here.
Over the last year or so we’ve had a lot of talk on this site about the homebuyer tax credit. It helped to spur activity in the real estate markets, bringing more first time homebuyers into the market than we’ve seen for a long time. It also brought in a lot of current homeowners when the credit was extended to include people who already own a home. We watched last month as there was a flurry of activity as the deadline loomed for people to put in a purchase agreement for a house in order to beat the clock. My brother was one of those people who made their home purchase on the last day possible!
Homebuyer Tax Credit Deadline Is Looming
April 30th was the deadline to get a signed sales contract, and buyers still have until June 30th to complete the sale. Problem is a lot of people ended up putting in a signed sales contract for a short sale or foreclosure home, and the process is moving slower than they had hoped. In fact, many of them may not meet the June 30th deadline to complete the sale.
Now there is an ammendment to H.R. 4213, “the American Jobs and Closing Tax Loopholes Act of 2010” bill being considered that would give thousands of homebuyers extra time in order to complete their sale.
Homebuyers may get an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.
Senate Majority Leader Harry Reid, D-Nev., said Thursday he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The proposal would only allow people who already have signed contracts to finish at the later date.
The bill, which is being sponsored by Senate Majority Leader Harry Reid, D-Nev., Sen. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., is currently under consideration. The bill wouldn’t extend the time available to put in a signed sales contract, which has already expired, but simply extends the time available to complete the sale to September 30th.
Many Sales May Not Complete Without Extension
Realtor groups have been pushing hard for such an extension because they’re seeing more and more loans that aren’t going to complete on time.
The National Association of Realtors has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.
“Time is of the essence,” said Lucian Salvant, a spokesman for the group. “It’s important for Congress to get this done, because there’s whole bunch of loans that aren’t’ going to close on time.”
Kay Bell of Don’t Mess With Taxes talks about how something like this won’t help future sales in any way, but that it may be needed to help with the high number of short sales that are pending currently.
The proposal wouldn’t significantly affect future home sales since the extension would apply only to home buyers with a contract in hand by April 30.But it would help buyers involved in short sales, which have become a major alternative to foreclosures in Nevada, accounting for about 30 percent of home sales in Las Vegas alone. The process, however, typically takes four to six months and there’s been concern in the Silver State and elsewhere that these transactions would not be completed by the impending April 30 tax credit deadline.
Housing data from a variety of sources indicate that the hike seen this spring in pending home sales might not necessarily translate into sales as many probably won’t become final by the credit’s deadline.
Housing Wire cites National Association of Realtors data showing pending sales grew 6 percent in April, following a 7.1 percent spike in March. Year-on-year, NAR says pending home sales are up 22.4 percent from April 2009. Many of these latest buyers pushed their luck and bought in April in hopes that expedited mortgage paperwork would qualify them for the break. That’s not going to happen in many cases, said outlook and commentary services firm Econoday senior economist Mark Rogers.
So it sounds like a ton of people bought homes, and especially short sales, in the hopes that they could close on time. Now it’s turning out that they probably won’t make the deadline. So now, if the bill isn’t passed it’s forecast that many of these sales that were showing up on the reports may never be completed, simply because they weren’t able to meet the original June 30th deadline.
The jump in pending home sales seen in April and even March — ahead of the first-time homebuyer tax credit expiration on April 30 — may not necessarily translate into sales, according to outlook and commentary services firm Econoday.
By extension, the firm said, the “unexpected strength” in pending sales during recent months may not take as many homes off the market as initially suggested.
“Many pending sales may not have closed by the required [tax credit] deadline and will never close,” said Econoday senior economist Mark Rogers in recent commentary.
So now it remains to be seen if Harry Reid and his co-sponsors can convince enough of their colleagues that this needs to be done. Reid’s own re-election changes may depend upon in part on getting this passed because of the high number of short sales in his area.
What do you think – should the deadline be extended past the June 30th deadline? Or do you think those people who haven’t been able to close yet just played it out too long and should be out of luck? Tell me your thoughts in the comments!
Fortunately for me, I had a great real estate agent that informed me up front that if I wanted to pursue a short sale or foreclosure that I may not make the deadline. I was able to make an informed decision from the start.
It would be awful to be in the position of not making the June 30th deadline if you signed a contract on time. On the other hand, at some point the window of opportunity will be closed. I believe September is fair. As always, thanks for keeping us updated!
I’m not in favor of government programs to juice selected industries, but since we have a crisis with foreclosures and short sales, it seems it would be a solid idea to clean those problems up by using the credit specifically to target those transactions.
Continuing it–just for FC’s and shortsales–would seem to be an investment in a legitimate clean up effort. So, keep it going until the unsold inventory of distressed properties drops down to normal levels.
Again, I don’t like doing this with public money, but it’s far less expensive than bailing out lenders or some of the other non-solutions that have been tried.
I think the tax credit was a great idea and a nice boost for the market, but at some point we have to see how the market shapes up when things return to normal. The tax credit has already been extended, and buyers had two whole months to tie things up after signing a contract. It is certainly a shame to go through all the work to get a contract signed and not get the credit, but in the end they should still be getting a home, which in and of itself is a great thing.
I wouldn’t mind if they extended the credit. The period for contracts already passed so this would only help those who signed by the end of April. With the volume of people trying to get the credit there is a lot of closings coming up but not a lot of time which is a real problem facing us. It really does take take to close and I think if a person did everything in their power to meet the deadline but couldn’t because of volume then they should be allowed to have an extension. I’m not sure if closing is the same in every state but in NY there are a number of people that need to schedule the same time together in order to get a closing date.
I’m glad that they extended the contract because there are a lot of people that are still waiting for their homes to finish being built as well, this way the contractors don’t do a bad job by trying to rush,
I with they would have extended the contract deadline by about a month though. I was in a contract before April 30th, the home had MAJOR issues that only an inspector could have found, so we backed out, now I”m in a new contract, closing next month, but do not get the credit…
We didn’t all lallygag until the last minute. I went under contract in early February. More then two months before the deadline. I’m still waiting for the sellers bank to approve the full price contract submitted in early February. I didn’t want to play games, I just wanted to buy the house. But the PMI company seems offended that they may suffer a loss after collecting premiums from the sellers for years, they are demanding a cash payout and multiple BPO’s! The bank promised me 2 weeks ago if I would sign an addendum extending my closing date (because they let the first one expire) they’d give me my approval letter. I signed within the hour and they’ve provided NOTHING! The banks and insurance companies are running a muck and hurting a lot of people. My sellers, and others, will probably be forced into foreclosure if I walk and I will walk on June 30th. I can ride it out and buy the same house for a lot less from the bank after they own it. There will be a whole lot of foreclosures after June 30th if this extension doesn’t happen.
I am one of the estimated 180,000 + people who are being held up by the banks who are overwhelmed. I think they should extend the tax credit for those of us who are already under contract. And I would feel the same even if I weren’t buying a house. Why should home buyers be penalized because the banks are overwhelmed? So if anyone up there is listening, hurry up already!