Local Homebuyers Missing Out on Tax Credit

When the U.S. Senate failed to muster enough votes last week on a bill that would extend unemployment benefits to the millions of Americans out of work, the prime focus was on those set to lose those benefits.

Yet, part of that bill also would have extended until Sept. 30 the deadline for those looking to benefit from the homebuyer's tax credit.

The credits, $8,000 for first-time homebuyers and $6,500 for current homeowners, would allow those who received it to get 10 percent of the home's purchase price up to the maximum credit on homes priced at $800,000 or less.

The home had to have a binding sales contract by April 30, but the completion of the sale did not have to be done until June 30 in order to qualify for the credit.
With the deadline set to qualify for the credit expiring Wednesday, some local real estate brokers are calling for a reinstatement of the program, not just a mere extension of the deadline.

"I think it's desperately needed until the (real estate) market is in recovery," said Michael Galgano, of IBNA Real Estate Group in New City.

Galgano would like to see the program extended another year since "it did spur the market."

Drew Kessler, of Rand Mortgage in New City, disagrees, saying the program was very beneficial but needed to end.

"I feel it was needed but the housing market is back standing on its own two feet now," he said.

Still, both men agree the Sept. 30 extension is needed and people who had contacts by the April 30 date deserve the tax credit.

The National Association of Realtors estimates as many as 180,000 homebuyers across the country may miss Wednesday's cut-off date. Locally, that number is unknown, but both Galgano and Kessler said they have clients who will miss out on the credit because the deadline wasn't extended.

"It's having a tremendous effect on our clients who were expecting to get the money," Kessler said.

The type of sale most affected by the lack of a deadline extension is the short sale, Galgano said.

A short sale is when the homeowner can't afford to pay their mortgage and the lender and homeowner agree to sell the property at an amount less than what is enough to pay off the loan in order to avoid foreclosure, which is a more costly and time-consuming measure.

While most home closings take between 30-60 days, a short sale typically takes between 60-120 days, putting the June 30 deadline date at the beginning of that timetable for homes with contracts by the April 30 date but well within the time needed by a Sept. 30 deadline.

"Anyone buying a short sale property – a chunk of them at least – didn't make the deadline," Galgano said.

Kessler said he also has seen delays because of the banks financing the deals. Between tougher underwriting guidelines put in place after the financial crash of 2008 and less staff in place to process applications, "the banks are not equipped to handle the influx of loans," he said.

Kessler was optimistic the Senate would revisit the issue after its July 4 recess and extend the deadline because of pressure put on it by the homeowners who face losing the credit and the real estate lobby, who also has been pushing hard for the extension.

While some buyers won't get the credit now, Galgano said that hasn't caused any deals to fall through.

"I haven't seen anyone pull out, but they're extremely disappointed," he said.