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First-Time Home Buyer Tax Credit Expires In Just 3 Months…Or Does It?

August 29th, 2009 categories: Buying, The Economy

Tax Credit ExpiringThe $8,000 first-time home buyer tax credit has been a boon to the real estate market — so much so that in today’s multiple-offer market, many first-timers are now worrying that they won’t be able to find a home and then close escrow before the credit expires at the end of November.

That Nov. 30 deadline is  just three months away, which means if you’re not already in escrow on a regular sale or bank-owned purchase, you probably need to be in contract on a home in the next 30-45 days if you want to have a realistic chance of closing by the end of November.

And if you’re planning to buy a short sale, which can easily take 3-4 months to complete, you may already be too late to get it closed in time to get Uncle Sam’s $8,000 credit.Pull Quote

But if you’re a first-time buyer — and remember, that means someone who hasn’t purchased a home in the past three years — don’t throw in the towel just yet…even if it looks like you may not be able to close before the end November.

For there are two bills floating around in Congress right now which would extend the credit for at least a full year.

Senate Version — $15,000 & Not Just For First-Timers

The first, is SB 1230, authored by Senator John Isakson of Georgia. Not only would this bill extend the credit for one year from whatever date this bill becomes law, but best of all, it would increase the credit from $8,000 to $15,000…AND…it would apply to ALL home buyers who are purchasing a home as their principal residence.

In its present form, the bill actually provides for a credit in the amount of 10% of the purchase price UP TO $15,000. So as long as the home sells for $150,000 or more, the maximum credit would be the full $15,000.

In addition to helping first-time buyers even more, This would be a huge perk for move-up buyers, who have been largely absent from a boom market filled with investors and first-time buyers.

SB 1230 has striking similarities to the Senate’s bill earlier this year. That bill also proposed a $15,000 credit for all owner-occupants. When the Senate and the House created their compromise bill, though, it was pared down to an $8,000 first-timer-only tax credit.  So the Senate is trying to push the larger/credit through again this time around.

House Version — No Increase, But Also Not Just For First-Timers

The House of Representatives, meanwhile, is working on HR 2801, which is authored by Rep. Tom Coble of North Carolina. That bill:

1) extends the tax credit to the End Of 2010 (not just for one year from the date of enactment).

2) would be available to ALL who purchase a principal residence.

3) would remove the income limit exclusion that prevents high-income buyers from taking advantage of the current credit.

As presently crafted, the biggest difference between the two bills, as you can see, is the amount of the credit. The House plans to keep it at $8,000 whereas the Senate is again pushing for a $15,000 credit.

From what I’ve been reading, it sounds like there’s fairly strong sentiment in Congress to extend the credit beyond November, which should come as welcome news to those first-timers who are fearful that they’ll miss out on the credit if they don’t close escrow by Nov. 30.

Whether the credit ultimately is expanded to include non first-time buyers and whether it stays at $8,000 or is raised to perhaps $15,000 remains to be seen.

So with a tad more than 3 months left before the current credit goes away, the clock is definitely ticking.  And a lot of politicking certainly lies ahead before we’ll know what to expect.

I’ll be keeping a close eye on these bills and will post updates as I read or hear of new developments. If you want to read the full text of the proposed legislation or track it yourself, Click Here.

Further Reading

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This entry was posted on Saturday, August 29th, 2009 at 12:04 am and is filed under Buying, The Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  1. Nichelle said at August 29th, 2009 at 7:35 am

    Thanks, I am one of those first time home buyers. I would love the additional time to save a bigger down payment and have been tracking this bill as well with fingers crossed. Either way, I will probably do the most responsible thing and postpone a home purchase for a year.

  2. Rod Herman said at August 30th, 2009 at 10:57 pm

    If the credit is extended or even increased, waiting for a year may work out okay. But keep in mind that between now and then, prices and/or interest rates could increase, which would decrease your buying power and limit the number of homes you’d qualify for. My hunch is that interest rates will rise once the government becomes convinced that the economy is indeed on the right track.

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