Legislation Would Extend Tax Credit Deadline

By:: Peter King | June 11, 2010

Legislation to extend the closing date to Sept. 30, 2010 for home purchases to qualify for the homebuyer tax credits has been introduced in the U.S. Senate.

The amendment, if adopted, would allow more time for short sales to be completed and qualify for the tax credits. Presently, sales must be completed by April 30 to qualify for the credits, which are up to $8,000 for first-time buyers and $6,500 for repeat buyers.

The amendment is sponsored by Majority Leader Harry Reid (D-Nev.), along with Sen. Chris Todd (D-Conn.) and Sen. Johnny Isaakson (R-Georgia).

“The first time homebuyer tax credit was very popular and successful in Nevada,” Reid said. “In addition to making it easier for thousands of Nevadans to purchase their first home, it helped reduce the sitting inventory of homes. By extending the transaction deadline, we can ensure that everyone taking advantage of this credit can complete the purchase of their new home.”

Short sales are known for taking an unusually long time to close – often six months or longer. Banks are reluctant to approve them unless they are certain that the seller will otherwise go into foreclosure and has tapped out all available financial reserves. They also want to be sure that they can recover more money from a short sale than they can from a foreclosure.

Prospects for passage are uncertain. The amendment is attached to a controversial package of tax breaks, safety net spending, Medicare adjustments, small business loans and other measures that could still see major changes or fail to pass the Senate entirely. The Senate is not expected to vote on the bill until at least next week, after which the House would still have to pass its own version.

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