Tax Credit Extension Would Allow Three More Months to Get Credits.
To qualify for the credit, buyers had to be under contract for a purchase by April 30. But under current law they have until June 30 to close on the sale.
Under the amendment, they would get an extra three months to close — useful for those who are experiencing delays in getting their mortgages approved or are somehow being affected by the many other issues that can arise and prevent a closing from occurring on time. The amendment would apply solely to buyers who entered a purchase contract by April 30.
"Because of this program's popularity and the time it takes to complete transactions such as short sales, I led the effort today to extend the closing deadline for this tax credit through September of this year — allowing lenders more time to clear a backlog of 180,000 potential home buyers nationwide," said Senate Majority Leader Harry Reid, in a news release after the amendment passed in the Senate this week.
The house had passed their own bill earlier in the year and now the two must iron out their differences.
My Take: Mixed
The Home Buyers tax credit was undoubtedly the shot in the arm that the housing market needed at the time. Part one of the program which ended in November of last year, and the extension through this April which also added a credit for current homeowners was very successful.
The reason stated to request an extension of the payout deadline was a backlog of thousands of mortgages that could not close on time. Specifically noted where short sales and foreclosures. To take the first point regarding a backlog of volume, I completely disagree. I consider 2005 to be the height of the bull market for real estate. From January 1, 2005 to June 22, 2005 we had 4134 single-family homes at the closing table. The same time this year there were just 3216. So in Rhode Island's case anyway, it wasn't because of an incredible burden of volume.
Regarding short sales and foreclosures and the desire to give extra time to collect because of the delayed closings; I personally think that risk is part and parcel of buying such a property. It is disclosed from the beginning that the closing date on a short sale or foreclosure is absolutely not written in stone. People take the risk of a short sale or foreclosure because they are buying a property below market value. The risk is the uncertainty of the closing date. In my opinion the buyer has already been compensated, and fully knew the risks of going into contract on this kind of property.
We can do more with this money.
