After failing by two votes to pass an extension of unemployment benefits that included an extension of the homebuyer tax credit, the Senate last night agreed to a separate bill to give homebuyers an extra three-months to close on a purchase that qualifies for a federal tax credits of up to $8,000.
Earlier this week the House passed the homebuyer credit extension that extends the deadline for closing tax credit eligible transactions from June 30 to September 30, 2010, so the legislation only needs the President’s signature to become law.
The credit expired at midnight last night. The new legislation will make the extension of the credit retroactive. However, contingency clauses in purchase contracts and the expiration of interest rate locks were based on the June 30 expiration date for the tax credit, and the closing of many properties may be more complicated even though the credit will be extended.
The National Association of Realtors estimates as many as 180,000 homebuyers who were under contract by April 30 missed the closing deadline, including 17,700 in California, 15,340 in Texas, 14,830 in Florida and 9,130 in New York.
Many of the transactions involve short sales, which require the lender to agree to take a loss on the seller’s mortgage, and generally take much longer to close than standard sales. As many as 15 percent of distressed property sales currently are short sales.
Some new home sales also are taking longer than normal to close because of demand. New-home contracts rose 30 percent in March and 15 percent in April, the biggest two-month gain in records dating to 1963, according to the Commerce Department. About a third of the April signings were for homes under construction, and a quarter were for those that weren’t started. Builders have been working day and night to complete homes before the deadline. A third group of delayed closings were caused by the extraordinary demands on lenders, appraisers and escrow agents by the numbers of closings tied end of the credit in some markets.
The U.S. Treasury reports that through March 27 some 2.2 million people had filed for the credit and the cost to the Treasury was nearly $16 billion.