Bill Gives More Time to Close Tax Credit Deals

By Robert Freedman, senior editor, REALTOR® Magazine

Sen. Harry Reid (D-Nev.)

Sen. Harry Reid (D-Nev.)

One of the frustrations we’ve been hearing from agents is that their clients want to take advantage of the home buyer tax credit but because deals are taking so long to close, mainly because of short sales, there’s a good chance they’ll miss the deadline.

That’s a concern that NAR has been sharing with members of Congress, and now we have evidence that lawmakers are taking the concern seriously.

Yesterday, Senate Majority Leader Harry Reid (D-Nev.) along with Sens. Johnny Isakson (R-Ga.) and Chistopher Dodd (D-Conn.), the Senate Banking Committee chairman, introduced legisation to extend until September 30 the closing deadline for households who have had a contract pending since April 30. Under the program as it stands today, these households have to close on their purchase by the end of this month or else lose their eligibility for the tax credits.

Two weeks ago I spoke with NAR Chief Economist Lawrence Yun and at that time he said REALTORS® were making a strong case to lawmakers that this extension is vital given how long it’s taking households to get to closing right now. He said it would be a shame if these households, through no fault of their own, missed their chance to get the credits simply because they were trying to buy a home that was on the market as a short sale.

Apparently, lawmakers are thinking along the same lines. When he introduced the proposal yesterday, Sen. Reid’s office said in a written statement something very close to that:

“There is growing concern that because of the time it takes for banks to complete transactions such as short sales, many of these home purchases would not be complete before the deadline through no fault of the homebuyer.”

NAR estimates about 180,000 households could see their chance at getting the tax credits disappear if the deadline for closing isn’t extended. What the Reid bill suggests, given its bi-partisan co-sponsorship, is that lawmakers across the board are aware of the delays caused by the large number of distressed sales in the market today and they don’t want to see home buyers penalized.

Considering the still-fragile state of the economy, taking steps to help those 180,000 households that made a good-faith effort to meet the deadline is something lawmakers clearly see as a reasonable and bipartisan accomodation to today’s short-sales climate.

Read Reid’s startement yourself.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. I hope they do something because I am in that situation with a buyer on a home owned by a bank. First of all getting mortgage commitment took at least 6 weeks. Because it was FHA and we didn’t find out FHA’s appraisal conditions to close until 2 weeks ago and the bank has now taken over 2 weeks( and we still don’t have an answer) to get Quotes never mind doing the work or telling us if they will do the work, I am afraid my buyer is going to lose the credit which he needs to do the rest of the work on the house.

  2. I know this extension would be a great relief for a few of our buyers who must complete FHA conditions from their appraisal and time is running out.
    When will we know if this is passed? Sooner the better.

  3. Tyson Mayers

    I hope this will not be limited to short sales. USDA funding issues also present a problem for closing on time.

  4. When the June 30th, 2010 extension was announced the home buyers believed it would be possible to get their offers closed on time. The tardy response from the banks the new lending practises and the disinterested attitude of the banks to follow the two week window for response has caused incredible stress for everyone that is trying in good faith to close these purchases. It is fine to make rules, but who is going to enforce them? We need the banks to follow the rules! They are not above the law.

  5. Pat Mullikin

    @Janet Dunlap….. I think events in the past two years show that the banks ARE above the law, and they are taking advantage of it. When there is no PERSON to penalize, rules will be ignored.

  6. Anne Meczywor

    Considering the original intent of the FIRST round of homebuyer tax credits was to clear up the backlog of foreclosures, and bank-owned properties are the main culprit in the delays, this bill only makes sense.

  7. Keith Wollaver

    isn’t the intention of the credit to get sales? The only deadline should be the April 30th deadline for accepted offers to purchase! Knowing first hand how long banks are taking to respond to short sale offers for one reason or another (don’t get me started!), why is there a completion deadline at all?? The goal is accomplished with the sale, right? Just forget the deadline to close and give everyone a break. This month the lenders, title companies, buyers and sellers are stressed to the max about the June 30th deadline. For what? And do not overlook the carnage that awaits 180K Sellers if those at the bank don’t do their job. Foreclosure awaits them, and that compounds the problem for their already suffering credit. The closing deadline makes no sense.

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