June 2, 2010
By Nick Timiraos and Dawn Wotapka, Wall Street Journal
The real-estate lobby wants Congress to extend the amount of time that potential home buyers have to complete transactions that qualify for the $8,000 federal home-buyer tax credit.
To qualify for the tax credit, buyers had to sign purchase agreements by April 30. Those buyers have until the end of June to close on those sales, and anything that closes after that wouldn’t get the tax credit.
The problem, says the National Association of Realtors, is that many of those signed contracts are on foreclosures and short sales, where the lender allows the house to sell for less than the amount owed to the bank. Those transactions take longer than normal to process, and there’s some concern that many sales may not actually close in time.
“There could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems,” said Lawrence Yun, the trade group’s chief economist, in Wednesday’s report that showed a 6% surge in pending home sales during April.
The NAR and its members are asking Congress for flexibility with the June 30 deadline, but it is unclear when—or even if—something would happen. (The National Association of Home Builders says it is not asking for a deadline tweak.) Congress would have to pass such a measure quickly, which is no easy task. One possibility would be to attach the extension to a piece of legislation that’s already winding its way through both chambers.
Last week, Congress went into the Memorial Day recess without completing a bill to authorize new funding for the USDA’s rural development loan program, which lets some home buyers tap 100% financing. Supporters of that program have been pushing for more funds for several weeks.
Without a last-minute reprieve, all would-be buyers can do is push for the different parties to close the deal in time.
But don’t spend that downtime shopping. Incurring additional debt can raise red flags with the lender, possibly derailing a deal at the last minute.
“We do see it happen where [buyers] qualify and then they go out and buy a new car,” says Brent Anderson, vice president of investor relations with Meritage Homes. “All of a sudden they don’t qualify anymore.”