Senators agree to extend home-buyer tax credit

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By Stephen Ohlemacher, Associated Press Writer
WASHINGTON — Senators agreed Wednesday to extend a popular tax credit for first-time home buyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time home buyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6% in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time home buyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.
The tax credits would be available to home buyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.
Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.
Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.
Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.
Majority Democrats have refused to add the amendments.
If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for home buyers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
The tax credit for money-losing businesses is a favorite among Republican lawmakers. Businesses could get tax refunds by using losses from 2008 and 2009 to offset taxable profits made in the previous five years. Under current law, they can only offset profits from the previous two years.
The provision would help a variety of industries, including retailers, manufacturers and home builders, though it's expensive.
"It's clearly a way to put cash in the hands of some major economic players," said Clint Stretch, a tax policy expert at Deloitte Tax.
A similar proposal that was ultimately dropped from the economic stimulus package enacted in February would have cost nearly $20 billion over 10 years. Lawmakers are working to reduce the price tag.
Because people are so strapped for cash, this is a good way to get refunds when businesses need them for operating expenses, said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Here is an article that sums up the position of where they are at on the New Home Buyer Tax Credit Extension. It appears thsat they have reached a tenative agreement. Also there is a provision that will allow existing home owners the opportunity to get a $6500.00 tax credit on purchasing another home. Check out the link below to read my blog post about it.

http://www.trulia.com/blog/chad_fay/2009/10/senate_likely_to…

http://www.msnbc.msn.com/id/33522046/ns/business-real_estate/

Check it out, they're extending it! This is great news.

The House passed a Bill last week extending the $8000 home buyer tax credit next year for military, diplomatic & intelligence personnel serving overseas. This probably increases the odds that Congress will extend or expand the tax credit program into 2010. Harry Reid is co-sponsoring a Senate bill that will extend the tax credit six months.

Yes, but only at the last possible second. It's way too popular to end now, and any economic downturn that follows a non-renewal would be political suicide.

I hope so. I had a conversation with a lender today, if most deals are not already in the pipeline really soon they will not be able to meet the 12-1-009 cutoff date. There is still a great inventory of market rate homes that needs to be moved.

Pelosi said she is also looking into extending and expanding a popular tax credit for first-time homebuyers. The credit, set to expire Dec. 1, allows first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000.

Pelosi said the credit could be expanded to people who already own homes, though she offered no details. Senate Majority Leader Harry Reid, D-Nev., has announced his support for extending the existing credit an additional six months.

"The question is, would that be just first-time homeowners or would you open it up to other purchasers of homes?" Pelosi said.

The program is scheduled to run for 11 months this year and cost a projected $6.6 billion. Extending or expanding the program would add to the costs.

This article (from 9-16-09) points to an increase in legislative support for an extension in the Senate.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aOcM…

At most 1 year, but I'd probably bet 6 months if I were a betting man.

Everything I have been hearing, the answer would be no.

This is a good question and I've been wondering myself. I hear conflicting things. I doubt we'll hear about it anytime soon and I wouldn't bet on it either. I can guarantee you they won't raise it though.

Househunter,
I would be willing to bet that they are going to extend it and possibly raise it. But thats just a guess. Much like a guess of who I think would win a football game. Nobody knows the true answer, but the way the housing market is still going I would expect it to get extended. However, if you are truley nervous, now is a great time to buy. Let me know if there is any other questions on the market conditions.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre.com
708-250-2696

Lynn is right.

If you are a serious purchaser, then the terms and conditions right now are more favorable than ever, particularly for first timers.

If you choose to wait and see, then we are only talking about an $8000 tax credit...does that really have a significant effect?

What if you knew for a fact that it will not be re-enacted? Would your lifestyle improve on December 1 if you made a purchase?

If so, then would you move forward even without a credit?

That's your motivation check...

I wish I had a crystal ball! There are many ways this can go. However if you are truly interested in taking advantage of the $8k credit, I would move foward with an aggressive search now and assume the option will go away as scheduled.

Best of luck,

Jenny

Lynn's answer is spot on. No one knows if it will be extended and if they do, I expect we will hear no earlier than November. Once we are in November it will be too late for anyone to close under the current provisions. If they announced an extension or new plan now, many people who are trying to meet the current deadline would not be in any rush to make a decision.

Anyone wanting to take advantage of the current credit must have a contract on a property within the next couple of weeks and I believe that is pressing it close.

If I can be of further assistance, please do not hesitate to contact me.

Best,

Sandra Matson, CRS, GRI, ABR, ADPR
Baird & Warner
Sandra@ChicagoMetroLiving.com
Direct: 312.981.2315

NO one knows answer HOWEVER if they announced today many people who would have an interest close prior to 11.30.09 would delay process.

Most likely government if extend may not announce till end of November .

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
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Lynn911

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