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The homebuyer tax credit that wouldn’t die

By Kay Bell · Bankrate.com
Wednesday, June 30, 2010
Posted: 9 am ET

I'm a big fan of horror movies, but Congressional action on the first-time homebuyer tax credit is starting to get too scary for even me.

This tax break has become a combination Frankenstein and zombie of tax laws. When first created in 2008, it wasn't really a credit (although lawmakers called it that), but a $7,500 interest-free loan. The next year it became a real credit and was increased to $8,000. Then it was extended into 2010. And people who weren't actually first-time homebuyers were included to the tune of a $6,500 tax credit.

And today, the date when the credit should be finished, it just won't die.

In order for home purchasers to get the tax credit, they had to have signed a contract by April 30 and close on the home today, June 30. With that deadline bearing down, the House and Senate yesterday got busy on extending the settlement deadline through Sept. 30.

The House actually passed a bill authorizing the three-month extension. The Senate late last night came up with their own bill that has the same Sept. 30 final (really, they mean it this time!) closing deadline.

There are two problems, however, before this can happen.

First, the Senate bill is part of a measure that includes continuation of unemployment compensation. The House defeated such a proposal yesterday, but reportedly will take up the measure again today.

But more daunting is getting the Senate bill through that legislative body. Right now there's only a new bill, cobbled together by Majority Leader Harry Reid, D-Nev., and Senate Finance Committee Chairman Max Baucus, D-Mont. They've got to get that bill before their colleague and then get it passed.

If and when that happens, then the House and Senate bills will have to be reconciled.

Things, however, are looking better for the zombie tax credit that haunts lawmakers. I'm betting they'll work something out, if not today then soon.

The reason for my prediction? Representatives and senators will face their own scary movie if they don't do the bidding of the housing and real estate industries. It's a midterm election year horror flick called, "The Mysterious Disappearance of Campaign Contributions."

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13 Comments
Melissa
July 01, 2010 at 10:33 am

Great news!

Andre
June 30, 2010 at 7:48 pm

I almost feel like I'm caught up in a bait and switch. We signed a contract to build our house back in March, at the time they were confident that they could have it done and closed by June 30th. One delay led to another excuse, and to make a long story shor they finally sheet rocked it yesterday (6/29).

If there had never been a tax credit that's fine, the land would still be a weeed-strewn field and everything would be fine. But we qualified for a tax credit and now, like I said, feel like we've been sucked into a bait and switch.

RJ
June 30, 2010 at 5:05 pm

Yes I agree,
I am also caught up in a short sale and cannot close by tomorrow.
Passing of this bill really helps people like me.
I hope and pray for this bill to be passed

Susan
June 30, 2010 at 3:31 pm

I agree with R...this is so nutty... I do work for a title company and it is absolutely NUTTSS today! We have over 15 closings....hope we can make it!

Thats our government for ya!!!! Go Figure!!!!

ch
June 30, 2010 at 3:27 pm

This is insane. I think the credit needs to stop. People won't even look anymore unless they are getting a credit. The interest rates are already low as they go, so mtg payments will be less anyway. Until we stop this madness our economy isn't going to change! There are so many short sales and foreclosures on the market that they only comps you have are so low, the true value of a home can't be determined. Anyone that doesn't have to sell their house, should take it off the market as you'll not get what it is truly worth. Do not extend unemployment anymore, as people aren't out really looking for jobs, they are sitting at home getting paid for NOTHING!!! And the valid business' in this country and people who actually pay their taxes are the ones paying for it. I too am in a short sale situation with a home. It is a bank approved short sale and I am thankful daily that the bank is working with us. Or should I do what others are doing, and just walk away from my obligations.

Lige
June 30, 2010 at 2:48 pm

My company usually closes 20 loans on average, we are looking at 44 so far due to this credit. Keep it going!

MD
June 30, 2010 at 12:50 pm

Hahah! Government running smoothly? What world do you live in R?

Dirty Curtis
June 30, 2010 at 11:33 am

The extension is very helpful for people like me caught up in a short sale that is backed up by unusually long bank processing time. There are an estimated 180,000 people like me who played by the rules and are held up. How is a measure to give me enough time to close on a home (which adds nothing more to our ballooning deficit) a bad thing?

r
June 30, 2010 at 11:26 am

This is beyond ridiculous that they are waiting til the last day to get this passed. Closing agencies and lenders are going crazy trying to cram in dozens of closings before tonight, where if this could have been taken care of a few days earlier then things would be going much more smoothly.

Michael Hill
June 30, 2010 at 10:42 am

Zombie movies happen to be one of my favorite genres.

Furthermore, I'm a first time homebuyer. I followed the rules and got into contract on time. This credit was most effective for people like me who live on a moderate income and may not feel as comfortable buying a house without this money to reinvest into the home. I'm buying a foreclosure which is inherently difficult. Giving buyers 2 months to close the sale from the contract deadline was ridiculous in the first place. They should have had to foresight to realize that this credit would give incentive to purchase foreclosures and short sale homes. I'm not in favor of Congress wasting time, giving unfair tax incentives, or otherwise overspending the country's money. However, this credit stimulated real estate sales. Then people like myself, who faced difficulties in closing by today, were hit with the slap in the face of losing the credit. Put yourself in our shoes and rethink your tone. If the American dream of homeownership was dangled in front of you and then snatched away, how would you feel? I'm desperately watching this story unfold today as I prepare to close on my house. If you were in the situation that and estimated 180,000 potential hoembuyers are in, you might actually understand.