Congress Approves Tax Credit Closing Deadline Extension

by Coldwell Banker Evergreen Olympic Realty, Inc. on July 1, 2010

Call it the temporary tax credit that just won’t end.

Congress approved late Wednesday an extension to the June 30 closing deadline for the home buyer tax credit, hours before it was set to expire. The move will give would-be buyers who signed a purchase agreement by April 30 more time to close on those deals and receive the credit that is worth up to $8,000. The new deadline is Sept. 30.

The Senate approved the measure unanimously on Wednesday, one day after the provision sailed through the House of Representatives with little opposition. The President is expected to sign the measure soon.

The Senate had failed to pass the provision last week when it was included in a bigger package that would have extended jobless benefits, among other measures. On Wednesday, an effort to reinstate unemployment insurance failed, and the Senate opted to pass the tax credit provision by itself.

In recent weeks, lenders and real-estate companies have warned of bottlenecks that could lead thousands of potential buyers to miss out on the credit that they thought they were getting. The probably is particularly acute for short sales, where a lender allows a home to sell for less than the amount owed. Banks and the federal government have stepped up efforts to encourage short sales as an alternative to foreclosure, but the deals take longer to approve because they require noteholders to reconcile losses.

Congress first created a tax credit for homeowners in 2008. It was extended and expanded twice during 2009. The last extension, approved last fall, said that house purchase contracts would have to be signed by April 30, and home buyers would have until June 30 to close on those sales. The extension is only good for those buyers who were under contract by April 30. Someone who signed a contract after April 30 and buys a home by Sept. 30 isn’t eligible for the tax credit.

The Senate also passed an extension of the federal flood insurance program until Sept. 30. The change is retroactive to June 1, when the program had lapsed.

Leave a Comment

Previous post:

Next post: