Wall Street Journal
Congress is considering an extension for would-be home buyers who are racing to close home sales in order to receive a federal tax credit.
The real-estate industry has warned that tens of thousands of buyers who rushed to buy homes to qualify might not close before the deadline imposed by Congress, meaning they could miss out on receiving credits worth thousands of dollars without action from Congress.
Congress last fall extended an $8,000 tax credit for first-time home buyers and added a smaller $6,500 credit for current homeowners who were buying a primary residence. To qualify for the credit, buyers had to sign purchase contracts by April 30 and must close on the transaction by June 30.
But there are so many transactions in the pipeline that the companies responsible for handling the sales, including mortgage lenders, appraisers and title insurers and real-estate brokers, say the last-minute home-buying rush in April has created bottlenecks.
On Thursday, Senate Majority Leader Harry Reid (D., Nev.) said he would back a measure to extend the June 30 closing date to Sept. 30 for buyers who had met the April contract deadline.
The National Association of Realtors estimates that between 55,000 and 75,000 home buyers who are under contract won't be able to close in time to claim the tax credit. The trade group is lobbying Congress to extend the June 30 deadline only for those buyers who met the April deadline.
"Everybody who got under contract at the end of April deserves to get the tax credit," says Stephen Adamo, president of Weichert Financial Services, a division of real-estate brokerage Weichert Realtors. "For reasons out of their control, they're in jeopardy of losing it."
That is causing heartburn for buyers like Alan Nickelson, a first-time home buyer who went into contract on a three-bedroom home in Kent, Wash., days before the tax-credit deadline in April. While he was pre-approved for a loan and will make a 20% down payment on the $275,000 home, he says the transaction has been held up because of home inspections and work repairs required by the appraiser.
Mr. Nickelson says it is "entirely possible" that he will miss out on the tax credit. He says he would have bought the home anyway but that he planned to use the $8,000 credit to offset repair costs. "It was icing on the cake, but it was really sweet icing," says the 52-year-old machinist.
One particular worry is that short sales, where a lender allows a home to sell for less than the amount owed, won't receive requisite approvals in time to meet the closing deadline. Unlike normal sales where only two parties—the buyer and the seller—negotiate the price, short sales are more time-consuming affairs because they require note-holders to agree on price.
An extension would benefit Kalliopi Michalopoulou, a first-time home buyer who went into contract in February and agreed to put 25% down on a $580,000 three-bedroom cooperative apartment in Upper Manhattan. Her pre-approval for the loan expired last month after renovations took longer than expected to complete.
"I'm so close to canceling now the contract because I'm so upset," she says. "If I knew I was going to get the tax credit, I wouldn't mind that much. But this feels like a punishment."
Link to the "I am Entitled article"
Grandpa:
"Everybody who got under contract at the end of April deserves to get the tax credit...". SAY WHAT! Deserves to get the tax credit!! Ask the closest grandchild what they think about having the debt plastered to their back. The program was extended and expanded back in November of 2009. If it took one 5 months to complete a purchase agreement, cut me some slack!
He says he would have bought the home anyway but that he planned to use the $8,000 credit to offset repair costs. "It was icing on the cake, but it was really sweet icing...". If you want icing on your cake, go to a bakery!
...short sales are more time-consuming. Really?? So you want a screaming deal, a tax credit and our children and grandchildren to shoulder the burden because the short sale is not proceeding as smoothly and timely as you desired!
Her pre-approval for the loan expired last month after renovations took longer than expected to complete. "I'm so close to canceling now the contract because I'm so upset," she says. "If I knew I was going to get the tax credit, I wouldn't mind that much. But this feels like a punishment." PUNISHMENT? How nice to be you and the center of the universe! Punishment is standing in the corner, going to bed without dinner, being grounded or on the receiving end of a deserved spanking!
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