TAX NEWS - June 2010

June 30th Homebuyer Tax Credit deadline may be extended

Homebuyers who signed a sales contract prior to April 30th to take advantage of the $8,000 tax credit but have not yet closed on their home, may find relief from their sleepless nights this June by way of a proposed bill amendment that would extend the closing deadline past June 30th.

Given the recent surge in loan volume and delays related to home appraisals and short sales, as many as 180,000 people who signed a sales contract by April 30th fully expecting to close by June 30th to receive the tax credit, would not be able to meet the current closing deadline, according to Lawrence Yun, the chief economist for the National Association of Realtors.

In speaking with local realtors and lenders throughout Metropolitan Denver, this has been a huge concern and the industry has been frantically trying to complete pending deals throughout the month of June in order for them to close.  A proposal co-authored by Senate Majority Leader Harry Reid (D-Nev) would extend the Homebuyer Tax Credit deadline to September 30, 2010 to give lenders more time to process their backlog of transactions.

In retrospect, the existence of any deadline for the closing seems a bit short-sighted and ambiguous.  While the need to place a deadline for the contract itself seemed reasonable, to both cap the ultimate expense of the tax credit for the federal government, as well as to create the sense of urgency to buy that was to provide the much-needed 'shot in the arm' for the housing industry, putting artificial time limits on the multifarious nature of a real estate transaction is problematic.  So while the September 30th extension would certainly be preferable to the existing deadline, a bill that would honor the tax credit to qualified purchasers that contracted before April 30th, regardless of the eventual close date would seem the most sage action to be taken.