200,000 could lose out on homebuyer tax credit

By Les Christie, staff writer


NEW YORK (CNNMoney.com) -- Nearly 200,000 homebuyers could lose out on the $8,000 tax credit because they can't get deals done by the June 30 deadline.

What did they do wrong? They tried to take advantage of the distressed properties flooding the market.

For example, many are trying to take advantage of short sales, buying from sellers who owe more on their mortgage than the home is worth. In these deals, the lender has to agree to forgive the remaining debt, and that can take time -- at least two to three months from the time an offer is made until lender approval. And that assumes a relatively clean deal, in which there's no second mortgage. If there are any complications, expect six months or more.

"The lenders have improved but they're still terrible," said Richard Smith, CEO of Realogy, the parent company of several franchise real estate brokers. "We started telling buyers back in January that short sales may not close in time for the credit."

Another factor slowing down closings is what gets found during inspections. The average foreclosed property comes with more maintenance and repair problems than conventional sales. Fixing those can take time, said Rick Davidson, CEO of Century 21.

Meanwhile, all deals these days are at risk because of appraisal issues. With home prices still shaky, mortgage lenders have gotten strict about making sure that the sale price is not inflated.

"New mortgage money is so concerned about pricing, they require another appraisal a couple weeks before closing," said Smith. "They're consumed with value." Lining up an appraiser and getting a report can add days, even weeks to the time it takes to close.

Congress is mulling an extension that would allow people to finish their transactions as late as Sept. 30 and still claim the credit -- as long as they signed sales contracts before the original April 30 deadline.

"Brokers and agents are concerned that if Congress does not pass an extension, many of these homes will end up back on the market, defeating the whole purpose and benefit of the tax credit," said Tara-Nicholle Nelson, a spokeswoman for real estate website Trulia.

But the extension is hardly a sure thing, according to Regan Lachapelle, deputy communications director for Senate Majority Leader Harry Reid, who introduced the measure. "We are still working to get the votes we need," said Lachapelle. To top of page


Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.07%4.28%
15 yr fixed3.18%3.26%
5/1 ARM3.36%3.43%
30 yr refi4.05%4.21%
15 yr refi3.17%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 3:34am ET
Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29

Sections

The deal would value Vice at $2.5 billion. The online media company would also create content for the cable network, delivering a wider audience. More

Gas prices are falling to nearly $3 a gallon in some parts of South Carolina, and that will soon be common in much of the country. More

Netflix told the FCC that its speed on the Comcast network became so slow that customers began dropping their service. More

The Coolest Cooler is the most successful Kickstarter campaign in the site's history, raising $13.3 million from over 62,000 backers. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.