The program was seemingly a success. First time home buyers entering into a contract prior to the end of April 2010 would receive up to an $8000 tax credit provided they close escrow by June 30,2010. Move up buyers were eligible for as much as $6500.
But now that the end of June is looming near…we see possible trouble on the horizon. In many cases lenders are having a hard time meeting the deadline . I have not heard any hard numbers on how many folks are still waiting to get the transaction closed…but I know of several personally. The tightened lending guidelines and appraisal issues seem to be a major sticking point. Borrowers are having to verify and re-verify
This morning David Rosenberg, chief economist at Gluskin Sheff + Associates, wrote:
"We heard from Ivy Zelman (top-rated real estate research) on Friday that the bill that included an extension for the closing date of the homebuyer tax credit fell two votes short of passing in the Senate. This virtually assures that it will not become law prior to the June 30th deadline. Ivy says that while it is difficult to quantify the impact, the fact that as of yet there is no extension, which was widely expected in this bailout nation, it could trigger a jump in cancellations beginning in July if a sizeable number of sales are not closed in time."
Rosenberg is referring to H.R.4213 the "American Jobs and Closing Tax Loopholes Act of 2010".
The amendment (S.AMDT.4344) to extend the closing date for the tax credit passed last week on a vote of 60 to 37.
The Senate is still debating the other tax extenders, and was unable to obtain cloture (this is what Zelman was referring to). This bill also includes the extension of the date (not duration) of unemployment benefits and other provisions. One of the sticking points is the extension of the COBRA benefit.
I wonder how many folks will elect to cancel their contract if they do not get the tax credit. Some of the folks I sold homes to were counting on this money to make much needed repairs to the home they were purchasing. Others were counting on the funds to pay off debt. I am glad I have no transactions that look like they might not close…but I feel badly for so many folks caught in the wait and pray game.