First-Time-Home-Buyer Tax Credit Extension Info

Date:October 23, 2009 | Author:Keane Ng | Category:8000 tax credit

The current $8,000 tax credit for first time home buyers is set to expire in approximately a month. Since then, there has been a rush for buyers to find a home and close before the December 1st, 2009 deadline.

In a related CNBC interview, several industry experts discuss whether extending the tax credit is a good idea and some details of some of the bills currently in Congress.

Finding information of the current bills being proposed to Congress isn’t the easiest thing to find. Kudos to Jay Thompson from www.phoenixrealestateguy.com who posted details of the bills last June.

Here are some details of the 6 proposals currently being discussed in Washington as mentioned in his blog. 5 were discussed in a post in June and the 6th on a blog posted last month.

Here is an excerpt from Jay’s June blog post:

Currently there are FIVE bills flitting about Washington, D.C. that would, assuming they are signed into law, either extend or expand the currently existing $8,000 homebuyer tax credit due to end on December 1, 2009.

Senator Johnny Isakson (R-GA) introduced Senate Bill S1230 – the Home Buyer Tax Credit Act of 2009 – on June 10. Senator Isakson created the original $15,000 homebuyer tax credit that morphed into the current $8,000 first-time homebuyer tax credit that became law when the Stimulus Bill was passed. This bill proposes a non-refundable tax credit up to $15,000, that can be split equally over two years, for all primary residence purchases – not just purchases by first time home buyers. The bill has been referred to the Senate Finance Committee for further debate. It has 12 cosponsors, notably including Senator Chris Dodd (D-CT), the Senate Banking Committee Chairman. It would expire one year after enactment.

Representative Kenny Marchant (R-TX) introduced House Bill HR 2619 on May 21. This proposes to extend the existing $8,000 tax credit to July 1, 2010 and adds provisions for a tax credit of up to $3,000 for homeowners who refinance. This bill has been referred to the House Ways & Means Committee for further debate. There are currently no cosponsors.

Representative Eddie Bernice Johnson (D-TX) introduced HR 2606 – the Home Buying Credit Expansion Act – on May 21. This bill proposes to remove the first-time homebuyer requirement (allowing all principle residence purchases to qualify for a tax credit) as well as extends the bill through Jan 1, 2010. It has one cosponsor (Rep Timothy Bishop D-NY) and has been referred to the House Ways & means Committee.

Representative Howard Coble (R-NC) introduced HR 2801 – the Home Ownership Move the Economy (HOME) Act – on June 10. From the Department of Redundancy Department, this bill appears virtually identical to Rep Johnson’s in that it opens the tax credit up to all primary residence purchases and extends the credit to Jan 1, 2011. It has no cosponsors yet and has also been referred to the House Ways & Means Committee.

Representative Dan Burton (R-IN) introduced HR 2655 on June 2. It has picked up six cosponsors, four Republicans and two Democrats. It joins its cousins in the House Ways & Means Committee and also eliminates the first time home buyer requirement while extending the credit to Jan 1, 2011. CLICK HERE TO READ THE ENTIRE POST

Here is an excerpt from Mr. Thompson’s recent post discussing the 6th proposal:

…a sixth bill to extend the tax credit was introduced in the Senate last week. Senate Bill S1678 extends the existing first-time homebuyer tax credit to June 1, 2010. It makes no changes to the requirement that one must be a first time buyer (defined as not owning a home in the last three years) or to income limits that currently exist in the current law. CLICK HERE TO READ THE ENTIRE POST

In the most recent news, Senate Majority Leader Harry Reid is proposing a counter to Senator Johnny Isakson’s Bill S1230. His proposal would extend the credit through December 31, 2010 with a plan to phase the credit down to $6,000 in April through the end of June, $4,000 from July through the end of September and $2,000 from October until the end of the year.

What’s interesting is how much these tax credits differ. Personally, I don’t feel making the credit larger will help much. Will a buyer really say, “$8,000 isn’t enough to get me excited. However, $15,000 would do the trick!” Every buyer I’ve talked to is throughly pleased with the amount.

I do think that raising the qualifying income limits, extending it to all home buyers and extending the deadline will. The goal for the tax credit is to incentivize home buyers into making a decision. I’ve found that many of the most undecisive buyers are ones who currently own a home. They know they’re going to lose money when they sell which often hampers their decision. I think an incentive for existing home owners is a great idea. This will help move inventory of sellers who are waiting for the market to turn, which may slow the growth of the real estate market for many years as mentioned by Spencer Rascoff on Bloomberg (Related Blog post here).

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Responses (23)

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JASON 8:23 AM - Oct 24,2009

IF A NEW BILL OR EXTENSION OF THE EXISTING BILL IS PASSED WILL THE QUALIFIED PEOPLE THAT CLOSE ON THERE HOME AFTER THE DEC 1ST DEADLINE BUT BEFORE THE SIGNING OF THE THE NEW BILL LOSE OUT ON THE CREDIT?
Keane Ng 9:35 AM - Oct 24,2009

No guarantees, but they will likely bridge the gap so no buyers are left out. This is what they did last year. There was a $7,500 credit that expired on December 31st, 2008. The current tax credit was signed into law after January 1st, 2009 but included all purchases done from January 1st. If an extension is signed into law, I expect a similar result.
julia 1:35 PM - Oct 26,2009

Today I began looking for homes for rent in the $2k/mo range (<– yes, we can afford a mortgage…) and save our savings for another time.

I have come to the realization, that without a bid currently in place, there isn’t a ‘snowball’s chance’ of closing by 11/30. We had recently started looking to buy due to a job relocation and were on the verge of bidding on a home. Very disappointing, that because of the length of time it takes to process the paperwork, the credit is not available. This should have had an ‘End date’ for a contract to be in place by, rather than a gambled closing date.

For me, the eight grand makes a difference, especially in a market such as Maryland where closing costs are astronomical (~25k to close on a 3 bedroom responsibly sized 50 yo home – exclusive of down payment). The credit was designated to be ‘returned to’ the 401k. Sure, I could bid; maybe snowball’s have a higher heat tolerance than I’m aware of. Maybe we will close in time. Maybe they will extend the credit for offers on the table, or just in general. And maybe they won’t.

Eight grand is eight grand… Until someone can tell me what happens to those who bid and didn’t make the cut off due to paperwork backlogs, a failed inspection item to be repaired before closing or other circumstance, my good faith money stays in my pocket.
Keane 2:19 PM - Oct 26,2009

Julia,

I would feel the same in your shoes. Your voice is exactly what the billmakers in Washington need to hear. So many of them are getting information that the tax credit is not a major factor in the home buyers decision. In your position, it clearly is.
Keane 9:24 PM - Oct 26,2009

UPDATE:

The extension could be passed by the end of this week. Stocks plummeted today due to fears of the credit expiring soon.

I first read about the extension on Bloomberg. Here’s a related Zillow blog on the topic.

http://www.zillow.com/blog/decison-on-extending-first-time-home-buyer-tax-credit-could-come-this-week/2009/10/26/
Hilary 10:32 AM - Oct 27,2009

Why are the banks so slow to act in shortsale situations? I put an offer in on a home that is a short sale home. The owner has an attorney representing her & she has proven hardship but the lender is moving at a snail’s pace. You would think that they would move faster to avoid ending up with yet another property on the books. Why is that?
Keane 5:42 PM - Oct 27,2009

Hilary,

I’m assuming you’re asking because you want to close before the tax credit deadline. Is that correct?

With respect to anybody working for the lenders, common sense and urgency are not things they typically practice. I will say it’s better than last year in most cases, but hardly fast.

Good luck on that home! Hopefully I’ll be telling you when the extension becomes official (if it does) and you won’t be under pressure to close so soon.

Keane
deanna 11:54 AM - Oct 28,2009

Hilary,
I too am in a short sale situation, it took me nearly 5 months to get an approval from BofA, now they want to hurry everything up and close less then 10 days! Amazing! My lender says BofA is playing games and says it can’t possibly close within 10 days.. my lender has to schedule an appraiser and an inspector yet since they can’t schedule one before getting the paperwork. My RE agent says they’ve seen a ‘trend’ now with the banks first waiting for months on end then hurry up!!! What’s the point in all of this?
Danielle Watson 6:03 PM - Oct 28,2009

I am in the middle of paperwork with the purchase of a house this month, and yes I think the mortgage industry lost the memo on the “Paper Reduction Act.” First of all it took me 8 months just to find a house, and I wasn’t even looking for Foreclosures! When I finally found one, of course with an FHA you gotta wait and wait and wait. Well, I am supposed to close by Nov. 30th and I sure hope that I make it! What I don’t understand about this whole thing is why couldn’t they just have had the bill to include all those people who have their loans already approved, banks in agreement, and everything in place to get the benefit if they don’t decide to continue this program. If we are waiting on FHA and they are back-logged, then it sure would make me feel a little better. I can’t sleep at night knowing that I might not make it. I want to be able to use that money to buy energy efficient appliances and get another tax break on that stuff too!
Keane 4:34 PM - Nov 5,2009

The house passed the bill today after the senate passed it yesterday. President Obama is expected to sign it into law by the end of this week.
cambridge water softener salt 3:53 AM - Nov 12,2009

First-Time-Home-Buyer Tax Credit Extension Info

Thanks for sharing
Keane 8:03 AM - Nov 12,2009

The president signed the bill into law on the 6th. It included an extension through the end of April, increased the income limitations and also includes a tax credit for move-up buyers.
Gail 10:18 AM - Mar 25,2010

I read here – http://www.savingtoinvest.com/2009/02/15000-first-home-buyer-tax-credit-in.html – that the home buyer credit could be extended yet again past summer 2010? Any truth or further details on this?
Keane 11:35 AM - Mar 25,2010

Gail,

This is the first I’ve heard of any extension. Keep in mind that last year, there were multiple different bills proposed to extend the original tax credit before congress settled on one. I haven’t seen anything hinting that another bill is being worked on to propose an extension.

Like the article said, healthcare is front and center at the moment. It may be just a matter of time before this topic is brought up again, but I’m not expecting an extension like I did last time. We’ll see.

Keane
Income Tax Extension 8:09 AM - Mar 31,2010

Really Good regarding income tax extension filing. I would like to read all post and main thing is that this year I think more people are filing tax extension because of recession. Thanks for sharing
twin screen players 1:42 PM - Jun 3,2010

in this time, I have come to the realization, that without a bid currently in place, there isn’t a ’snowball’s chance’ of closing by 11/30. We had recently started looking to buy due to a job relocation and were on the verge of bidding on a home. Very disappointing, that because of the length of time it takes to process the paperwork, the credit is not available. This should have had an ‘End date’ for a contract to be in place by, rather than a gambled closing date.
Keane 2:41 PM - Jun 3,2010

twin screen players,

They did set a new deadline of April 30th for a contract and June 30th for closing, but those dates have since passed.
Danielle Watson 2:53 PM - Jun 3,2010

Good luck in getting your tax return money back anytime soon no matter when you closed (I closed Dec. 4th, 2009)! I sent my taxes in early March from Nevada. I sent in all the proper documents, closing statement and lo and behold 6 weeks later I get notice in the mail that I didn’t have a specific HUD form. Well, in Nevada we get the closing statement and that should have sufficed! When I sent them all the information again, I called and they said that it would be another 6-8 weeks before it was even reviewed and no way of knowing if they even got the paperwork. I certified it, but that doesn’t matter. Bureaucracy for sure!
oracle rac training 4:44 PM - Jun 7,2010

i think It included an extension through the end of April, increased the income limitations and also includes a tax credit for move-up buyers..
financial spreadbetting 10:57 PM - Aug 30,2010

In the UK there is a tax incentive to first time buyers (not having the pay stamp duty). This has encouraged them back into the market but recently read that this is starting to change.
Jay 10:35 AM - Oct 24,2010

Thanks for the info now I’ll know.
new home building guide 5:55 PM - Nov 9,2010

Maybe with a new house in Washington we can revive the tax credit and get some action going during the winter and carry that momentum into the spring of 2011.
home building 1:52 PM - Feb 6,2011

Probably not going to happen.