While the home tax credit extension looks dead, it's probably just on life support and may be revived by adding it to another bill on the Senate floor. The tax-credit extension had been attached to a large stimulus package including business tax breaks, renewal of the flood insurance program and extension of unemployment benefits.Now the Senate will need to look for something else to attach the extension to, but since Senate Majority Leader Harry Reid (D-Nev.) is one of its big backers, it's likely that he'll find a way.
This extension wouldn't help those who didn't sign a contract by April 30, but it would help anyone who is not able to close on a deal by June 30 because of delays in getting a mortgage. The extension would give them until Sept. 30 to close the deal.
Lawrence Yun, the chief economist for the National Association of Realtors predicted that 25 to 30 percent of the buyers who made the deadline for signing a contract won't be able to close by June 30. That means about 180,000 home purchases could fall through. Most of the deals that will take longer than 60 days to close are those involving short sales or foreclosures, but with such a backlog of mortgage applications even others could be impacted.
Other delays are being caused by the expiration of the National Flood Insurance Program. Homes for which mortgage lenders require flood insurance can't close until that program is extended. The extension for the flood program also was lost when the Senate did not pass the stimulus measure.
The deals don't have to fall apart, but buyers who don't close by June 30 could lose the tax credit of $8,000 for first-time buyers and $6,500 for repeat buyers. Buyers can still buy the home, but if they're counting on the incentive to help with closing costs or the down payment, the deal will likely wilt without an extension until Sept. 30.
If you're buying a new home, builders and sellers might try to keep the deal together by adding other incentives to make up for the lost tax credit. Stay in touch with your builder, real estate agent or seller to see what your alternatives may be if the tax-credit extension doesn't pass in time.
Lita Epstein has written more than 25 books, including "The 250 Questions Everyone Should Ask About Buying Foreclosures."
See homes for sale in across the U.S. at AOL Real Estate.
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