In response to the backlog of first-time homebuyers hoping to take advantage of federal tax credits, the Senate this week agreed to extend the measure for three months.
The amendment, sponsored by Sen. Harry Reid (D-Nev.), is intended to give the approximately 180,000 homebuyers enough time to close on their respective deals and qualify for federal tax incentives. The Senate passed the extension 60-37.
"The first-time homebuyer tax credit was an extremely popular and successful program that has helped Americans purchase homes and given a boost to our economy," Reid said in a statement. "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."
Under the tax credit's current deadline, qualifying purchases under contract by April 30 must close by June 30 to get the $8,000 first-time credit or the $6,500 credit for long-term residents who do not qualify as first-time homebuyers. The House of Representatives still must approve the amendment for the extension to become law - a vote that is likely before the end of this month, according to reports.
The extension is necessary because of the rush of buyers clogging the system at the mortgage-processing stage, according to Don White, who has been a Chicago-area real estate agent of Coldwell Banker for more than 30 years.
"It didn't make sense for the government to offer such a sweet incentive and then arbitrarily dash those hopes simply due to clerical and processing problems. It kind of defeated the entire purpose," White told AccountingWEB. "Also, placing a buyer in such a desperate position left them potentially vulnerable."
When there's a deadline in the near future, it puts a buyer in a painful position should lending rates mysteriously increase near that deadline or if last-minute funding fees are tacked on, according to White.
"Also, any last minute dispute between buyer and seller would certainly favor the seller due to the urgency for the buyer to close by the deadline. We saw this as the contract deadline got close. Buyers tended to be more malleable in negotiations because of their urgency to meet the deadline," White said.