LA Real Estate Advice: Tax Credit Extension Relieves Late Homebuyers
Congress sent President Barack Obama a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring. The House approved the measure on Tuesday and the Senate approved it Wednesday night. Obama is expected to sign it.
The legislation gives buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the original terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The bill only allows people who already have signed contracts to finish at the later date.
Congress also approved the National Flood Insurance Program, which buyers need to qualify for a mortgage for a home located in a flood zone.
"We're elated," said Ron Phipps of Phipps Realty in Warwick, R.I.
About 180,000 buyers needed the tax credit extension, the National Association of Realtors estimated.
A lot of the holdups came from the mortgage approval process. Lenders were inundated with buyers rushing to close their sale and qualify for the tax credit.
"It wasn't issues with qualifications or bad appraisals," Phipps said. "The overwhelming demand simply bogged down the system."
Phipps also noted that without the extension, some buyers would have walked away from their sales. Some buyers put clauses in their contracts that let them out of the deal if they couldn't close before the June 30 deadline.
Matthew Morneault, 24, could have been one of them. A member of the Maine Air Force National Guard, Morneault is counting on the tax credit money to make roof and patio repairs on the four-bedroom house he's buying in a short sale, where the bank agrees to let a home sell for less than what is owed on it.
He has been ready to close on the $154,000 home in Bangor, Maine, for two months and was ready to write off the deal if he didn't close in time for the tax credit. He is waiting for the seller's bank to provide documents to the title company to show the property is free of liens.