Senate responds to glut of prospective homebuyers seeking tax credits

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.
 

Related articles:

You may like these other stories...

School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...
Many senior US tax professionals believe that a streamlined audit process will be the top benefit resulting from the IRS Transfer Pricing Audit Roadmap, a new toolkit organized around a notional 24-month audit timeline,...
Tax accounting to be simplified for money-market fundsThe US Securities and Exchange Commission (SEC) voted 3-2 on Wednesday for sweeping changes to institutional money-market funds, Emily Chasan, senior editor of...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.