Would-be home-buyers race to close deals before tax credit deadline
Saturday, June 19, 2010
More breathing room could be on the way for people racing to meet the June 30 closing deadline to qualify for a home-buyer tax credit.
The Senate recently passed a measure that would give buyers who met the April 30 deadline for signing a purchase agreement an additional three months to close their deals. The legislation, attached to a bill that would extend unemployment benefits, still needs final approval in the House.
The new closing deadline would be Sept. 30.
Buyers such as Craig Hudson, 36, could benefit from the extra time. Hudson, who recently married, had planned to wait until summer to look for a home, but the availability of the tax credit motivated the couple to enter the market early. In late winter, Hudson found a place in Leesburg that was bigger than his home in Falls Church and closer to his job as a database manager. The $342,000 price was high, but he said the $8,000 tax credit would help furnish the place.
Although the couple signed the purchase agreement in mid-February, easily meeting the April 30 deadline, paperwork delays have held up their closing. Now their mortgage is scheduled to close July 12 -- too late to qualify under the original deadline.
"I've never been one for government assistance programs or tax credits," Hudson said. "But it's funny that now I'm in the situation of being able to potentially qualify for it or not, I'm a big fan."
Tom Rodden, a real estate lawyer who handles closings for RGS Title in Silver Spring, says most people still aim to finish before June 30. "Introducing the bill this late actually probably was good," he said. "It's saying to the public that if the government offers this kind of incentive, jump on it and don't think it'll be around."
Officials at the National Association of Realtors said data from their survey of pending home sales suggest that as many as 75,000 prospective buyers of distressed properties met the contract deadline but may not be able to close by June 30. At stake are tax credits of up to $8,000 for qualified first-time buyers and up to $6,500 for some repeat buyers.
"People are hurrying to make it in time," said Vinh Nguyen, owner of Westgate Realty Group in Falls Church and chairman of the board for the Northern Virginia Association of Realtors.
Nguyen pointed out that the deadlines already are more lenient for some people in the military. Active-duty military personnel who served overseas this year or last have until April 30, 2011, to sign a purchase contract and until June 30, 2011, to close their deals. Because housing deals typically take 30 to 60 days to close, most of those signed by the end of April have gone through. But real estate agents say that paperwork can be delayed by problems such as complex bankruptcies, disagreements about appraisals, haggling over closing costs and improper foreclosures.
For example, Tony DeVol, owner of Tradition Title in Bethesda, said a real estate agent called him in recent weeks for advice on the sale of a condo. The deal was scheduled to close and had preliminary approval, but then the lender's underwriter refused because one entity owned more than 10 percent of the units in the building. The borrower had to scramble to find a new lender at the last minute.
A developer that has sold most of the units in a building might decide to get out of the project by dumping the remaining few for prices below the market value, DeVol said. "In years past, that didn't make people balk, but the underwriters are looking at anything that might have an impact on the future value of units in the buildings," DeVol said.
NAR spokesman Lucien Salvant said the bulk of the loans having trouble meeting the normal 45- to60-day closing period are involved in short sales, in which the bank agrees to accept a price that's lower than the amount owed on the mortgage. But there can be other causes of delay, as well. Lenders are scrutinizing potential borrowers' applications more thoroughly, which takes more time. Rising numbers of self-employed workers must pull together complicated histories of their part-time jobs to convince lenders of their creditworthiness. Sometimes lenders find discrepancies in income reported to them when they check it on borrowers' tax returns.
Lindsay Simmons, a loan officer at SunTrust Mortgage in Falls Church, said she is putting in more 12-hour days than usual, rushing to meet the June 30 deadline. "We know how important it is to get the loan finished before the end of the month," she said.