Homebuyer Tax Credit closing date extension has passed both houses and is awaiting POTUS signature, which is expected to happen today. A homebuyer still had to be in contract by 4/30/2010, but the deadline to close as of yesterday will be extended to by 9/30.
14 thoughts on “Tax Credit Extended to Closings by 9/30”
Eh, I don’t know about this. The more I read about the tax credit, the more I’m convinced that it’s actually adding to the problems. Tax credits provide an incentive for taking out riskier loans, wouldn’t you say?
In this case the credit is already capped at an end date for the contract of 4/30/2010. Anyone taking on a mortgage would already have their mortgage in place. The extension just prevents people with processing problems from losing the credit because they were waiting for the house to be built, or for lienholder approval on a short sale, or other time oriented technicality.
Also “riskier loans” by and large do not exist anymore and were pretty much abolished in July of 2007.
The “dark side” of the closing date extension is that people will be tempted to falsify their contract dates. There was already some noise about that when the date was June 30 for closing. This 90 day extension will exacerbate that problem. The rationale so far for fraud has been that the IRS previously only wanted the Closing Statement and not the Contract at all, but I think they will be adding that additional requirement somehow and soon. Still, it’s pretty easy to fake up the contract date and that will be the “monster” being fed by this extension.
The other issue is that an “incentive” by definition of the word cannot happen after the fact (contract). People who entered into contracts expecting to get the credit will be well served by this extension, and that is the intent of the extension. But people who knew they could not close by June 30, but were buying anyway, will now get the credit. That extinguishes the purpose of “incentive to buy” and is a waste of taxpayer money.
I dunno Chuck….have you tried to get a risky loan these days? The risky loans of today are more or less the same risky loans that existed for decades (FHA, VA, i.e. low down payment), with fairly low default rates (until recently that is).
Besides this is just an extension of an existing credit, mostly necessitated by the horrible slowness of banks approving short sales and REOs’. The cutoff to enter into a contract was April 30th, I believe.
Cannot see how anyone benefits from empty homes. OK, rats benefit, until the food runs out…, and they get tired of chewing the wallboard and chasing cockroaches.
Let’s get people back into houses that want them, as long as they can demonstrate an ability and willingness to repay the loan.
As I said to Chuck, people who entered into contracts expecting to close by June 30 will be well served by this extension. Those who entered into contracts before April 30 knowing they could not close by June 30 at the time they signed the contract will get a “windfall profit” at the expense of the taxpayer.
The temptation for anyone closing by 9/30 to falsify the contract date will be immense, and that was already a problem for May contracts closing in June.
I know you had a closing problem. Does this help? Or does the rate lock extension fee knock them out? Saw that on Rhonda’s post…
We’re not talking about an agent being involved in faking a contract date. We’re talking about someone filing a tax return, and none of the things you mention is part of an individual’s requirement to file for the credit.
The contract date does not show on the closing statement, and to date that has been the only paper needed to file for the credit.
Think of it this way. Buyer submits an offer on April 20th but doesn’t finish negotiating with the seller until May 2nd and closes on June 15th. Does that qualify for the credit? Wasn’t signed around until May 2nd, but contract date could be construed as the date on the contract, which would be April 20th. The date at the top of a contract is NEVER the actual date of the contract…it is only the date the offer was prepared, not the date it became a binding contract
If you get a contract like that, would you question that it took a couple of weeks to negotiate the final acceptable terms? I had one that went back and forth for a month before final agreement on terms. Date on the contract was a full month prior to the date everyone finished initialing the counter offers.
I agree that a thorough investigation would possibly unearth the truth. But unless the IRS adds something to the current filing requirements, nothing official with a contract date is required. Even if they add “first page of contract showing contract date” to the filing requirement…well, will they reach for the white out on tax filing day…or say no to $8,000. That is the question.
Eh, I don’t know about this. The more I read about the tax credit, the more I’m convinced that it’s actually adding to the problems. Tax credits provide an incentive for taking out riskier loans, wouldn’t you say?
Hi Chuck,
In this case the credit is already capped at an end date for the contract of 4/30/2010. Anyone taking on a mortgage would already have their mortgage in place. The extension just prevents people with processing problems from losing the credit because they were waiting for the house to be built, or for lienholder approval on a short sale, or other time oriented technicality.
Also “riskier loans” by and large do not exist anymore and were pretty much abolished in July of 2007.
The “dark side” of the closing date extension is that people will be tempted to falsify their contract dates. There was already some noise about that when the date was June 30 for closing. This 90 day extension will exacerbate that problem. The rationale so far for fraud has been that the IRS previously only wanted the Closing Statement and not the Contract at all, but I think they will be adding that additional requirement somehow and soon. Still, it’s pretty easy to fake up the contract date and that will be the “monster” being fed by this extension.
The other issue is that an “incentive” by definition of the word cannot happen after the fact (contract). People who entered into contracts expecting to get the credit will be well served by this extension, and that is the intent of the extension. But people who knew they could not close by June 30, but were buying anyway, will now get the credit. That extinguishes the purpose of “incentive to buy” and is a waste of taxpayer money.
I dunno Chuck….have you tried to get a risky loan these days? The risky loans of today are more or less the same risky loans that existed for decades (FHA, VA, i.e. low down payment), with fairly low default rates (until recently that is).
Besides this is just an extension of an existing credit, mostly necessitated by the horrible slowness of banks approving short sales and REOs’. The cutoff to enter into a contract was April 30th, I believe.
Cannot see how anyone benefits from empty homes. OK, rats benefit, until the food runs out…, and they get tired of chewing the wallboard and chasing cockroaches.
Let’s get people back into houses that want them, as long as they can demonstrate an ability and willingness to repay the loan.
Roger,
As I said to Chuck, people who entered into contracts expecting to close by June 30 will be well served by this extension. Those who entered into contracts before April 30 knowing they could not close by June 30 at the time they signed the contract will get a “windfall profit” at the expense of the taxpayer.
The temptation for anyone closing by 9/30 to falsify the contract date will be immense, and that was already a problem for May contracts closing in June.
I know you had a closing problem. Does this help? Or does the rate lock extension fee knock them out? Saw that on Rhonda’s post…
Nah, it was Russ that had a closing problem related to the credit.
I’m working on a purchase that narrowly missed the cutoff, (no credit), never crossed my mind that anyone would falsify the date to qualify.
Ardell mentioned: “Still, it’s pretty easy to fake up the contract date and that will be the “monster
Tim,
We’re not talking about an agent being involved in faking a contract date. We’re talking about someone filing a tax return, and none of the things you mention is part of an individual’s requirement to file for the credit.
The contract date does not show on the closing statement, and to date that has been the only paper needed to file for the credit.
Think of it this way. Buyer submits an offer on April 20th but doesn’t finish negotiating with the seller until May 2nd and closes on June 15th. Does that qualify for the credit? Wasn’t signed around until May 2nd, but contract date could be construed as the date on the contract, which would be April 20th. The date at the top of a contract is NEVER the actual date of the contract…it is only the date the offer was prepared, not the date it became a binding contract
If you get a contract like that, would you question that it took a couple of weeks to negotiate the final acceptable terms? I had one that went back and forth for a month before final agreement on terms. Date on the contract was a full month prior to the date everyone finished initialing the counter offers.
I agree that a thorough investigation would possibly unearth the truth. But unless the IRS adds something to the current filing requirements, nothing official with a contract date is required. Even if they add “first page of contract showing contract date” to the filing requirement…well, will they reach for the white out on tax filing day…or say no to $8,000. That is the question.