It Extends the Deadline for Closing the Transaction
Senate Extends Tax Credit Closing Deadline. The U.S. Senate voted Wednesday to extend the home buyer tax credit closing deadline to Sept. 30, giving an estimated 180,000 buyers who met the contract deadline of April 30 extra time to close the transaction.
The extension was added to a bill to pay for jobless benefits.
The NATIONAL ASSOCIATION OF REALTORS® estimates that one-third of qualified applicants have been notified that they will be unable to close by the deadline. The Mortgage Bankers Association says delays are caused largely by the volume of transactions.
The measure still must be approved by the House.
Source: Associated Press, Andrew Taylor (06/16/2010)
Dealing With IRS Tax Credit Rejections
The IRS has been rejecting first-time home buyer claims from anyone who shows a Form 1098 Mortgage Interest Expense in their prior year files.
In many cases, the applicants are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat, or other recreational property.
If you are in this unfortunate position, here is some advice from Enrolled Agent Eva Rosenberg, who authors the Web site TaxMama.com.
• Respond to the IRS immediately and tell them why their rejection is wrong. Be prepared to prove that the mortgage the IRS is seeing isn’t on a personal residence. First-time home buyers are entitled to own other types of real estate and still get the home buyers credit, so provide proof that the previous mortgage was on something else.
Source: TaxMama.com, Eva Rosenberg, EA (06/16/2010)
• Send a letter explaining the situation and providing proof of a previous rental or other non-ownership living situation, including copies of rental contracts for the last three years, an old driver's license showing that address, utility bills, etc.
• Home buyers who believe the IRS may view their situation in this way should be proactive, providing proof that they are a first-time buyer when they initially file for the credit.
• Anyone who is rejected after two attempts to explain the problem to the IRS should call the Taxpayers Advocate Service toll-free, (877) 777-4778, their Congressman, and their Senator, Rosenberg advises.
NAR Lauds Proposal to Extend Tax-Credit Closings
The National Association of REALTORS® today expressed thanks on behalf of America’s homebuyers to three Senators for introducing a measure to extend the present home buyer tax credit closing deadline to Sept. 30. They are Senate Majority Leader Harry Reid, D-Nev., and Sens. Johnny Isakson, R-Ga., and Chris Dodd, D-Conn.
“As the leading advocate for homeownership and housing issues, NAR commends these Senators for their attentiveness and sensitivity to thousands of qualified home purchasers, who through no fault of their own, are not able to meet the closing deadline of June 30 for the home buyer tax credit. Now we urge the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these home buyers,” said NAR President Vicki Cox Golder.
The measure was offered as an amendment to H.R. 4213, a tax extension bill now in the Senate.
NAR estimates that approximately 75,000 home buyers of distressed properties who have qualified for the tax credit and met the contract deadline of April 30 would not be able to close their transaction by the June 30 closing deadline. REALTORS® have reported as many as one-third of qualified applicants have been notified by lenders that their mortgages will not close before June 30 due to the sheer volume of applications in the pipeline.
“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a work-flow jam with the lenders or other delays and might not be able to complete the purchase of their homes,” said Golder. “It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”
Golder said she also wanted to make this clear: “This amendment does not extend the deadline for home buyers to qualify for the tax credit; it extends the deadline for closing the transaction, from June 30 to Sept. 30. Since these applications were already in the pipeline and figured into the program’s cost, the extension of the closing deadline should not incur any further government costs.”
Buyers Rush to Meet Tax Credit Deadline
Nearly half the homes sold in March – 48.2 percent – were purchased by first-time buyers, according to a survey of more than 1,500 real estate practitioners by Campbell/Inside Mortgage Finance.
"Many observers had felt that the pool of first time home buyers had been depleted last fall," Thomas Popik, research director for Campbell Surveys, said in a statement. "Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time home buyers."
Home Sales Rise on Tax Credit, Favorable Market
Buyers responding to the home buyer tax credit and favorable affordability conditions boosted existing-home sales in March, marking the beginning of an expected spring surge, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, and are 16.1 percent above the 4.61 million-unit level in March 2009.
Lawrence Yun, NAR chief economist, said it is encouraging to see a broad home sales recovery in nearly every part of the country, with two important underlying trends. “Sales have been above year-ago levels for nine straight months, and inventory has trended down from year-ago levels for 20 months running,” he said. “The home buyer tax credit has been a resounding success as these underlying trends point to a broad stabilization in home prices. This is preserving perhaps $1 trillion in largely middle-class housing wealth that may have been wiped out without the housing stimulus measure.”
Rise in Inventories, Prices
Total housing inventory at the end of March rose 1.5 percent to 3.58 million existing homes available for sale, which represents an 8.0-month supply at the current sales pace, down from an 8.5-month supply in February. Raw unsold inventory is 1.8 percent below a year ago, and is 21.7 percent below the record of 4.58 million in July 2008.
“Foreclosures have been feeding into the inventory pipeline at a fairly steady pace and are being absorbed manageably,” Yun said. “In fact, foreclosures are selling quickly, especially in the lower-price ranges that are attractive to first-time home buyers.”
A parallel NAR practitioner survey shows first-time buyers purchased 44 percent of homes in March, up from 42 percent in February. Investors accounted for 19 percent of transactions in March, unchanged from February; the remaining sales were to repeat buyers. All-cash sales remain elevated at 27 percent in March, the same as in February.
The national median existing-home price for all housing types was $170,700 in March, up 0.4 percent from March 2009. Distressed homes, typically sold at a 15 percent discount, accounted for 35 percent of sales last month – unchanged from February.
“With home values stabilizing, a revival in home buying confidence will likely help the housing market get back on its feet even as the tax credit impact disappears,” Yun said.
A Great Time to Buy
NAR President Vicki Cox Golder said buying conditions are in near-perfect alignment. “Even with tougher loan standards, historically low mortgage interest rates with affordable prices and a sense that the market is turning have created optimal conditions in much of the country,” she said.
How to Pay Zero Taxes
- provides you with simple strategies that are sure to save you money—this year, next year, and
beyond. From converting personal expenses into business deductions to avoiding
(or surviving) an IRS audit, Jeff Schnepper’s guide comprehensively covers more
deductions than any other tax book
“With the fast-approaching April 30 deadline to get a contract in place for the tax credit, REALTORS® are working harder than ever to negotiate transactions, arrange services and complete paperwork,” Golder said. “Because many repeat buyers need to sell their current home first, many will be purchasing later without the tax credit but now have the benefit of a more buoyant housing market.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage dipped to 4.97 percent in March from 4.99 percent in February; the rate was 5.00 percent in March 2009.
Single-family home sales rose 7.3 percent to a seasonally adjusted annual rate of 4.68 million in March from a level of 4.36 million in February, and are 13.3 percent above the 4.13 million level a year ago. The median existing single-family home price was $170,700 in March, up 0.6 percent from March 2009.
Regional, Metro Area Performances
Single-family median prices rose in 14 out of 20 metropolitan statistical areas reported in March in comparison with a year earlier. Five metro areas experienced double-digit increases, including San Diego, St. Louis, and Boston.
Existing condominium and co-op sales increased 3.1 percent to a seasonally adjusted annual rate of 670,000 in March from 650,000 in February, and are 39.3 percent higher than the 481,000-unit level in March 2009. The median existing condo price was $170,600 in March, which is 0.7 percent below a year ago.
Regionally, existing-home sales in the Northeast increased 6.0 percent to an annual level of 890,000 in March and are 25.4 percent higher than a year ago. The median price in the Northeast was $249,800, up 8.9 percent from March 2009.
Existing-home sales in the Midwest rose 7.2 percent in March to a pace of 1.19 million and are 15.5 percent above March 2009. The median price in the Midwest was $139,300, up 0.2 percent from a year ago.
In the South, existing-home sales increased 7.1 percent to an annual level of 1.97 million in March and are 13.9 percent higher than a year ago. The median price in the South was $154,800, up 5.2 percent from March 2009.
Existing-home sales in the West rose 6.6 percent to an annual rate of 1.30 million in March and are 14.0 percent above March 2009. The median price in the West was $209,400, down 7.9 percent from a year ago.