The Wall Street Journal reported this week that the National Association of Realtors is pushing for an extension of the June 30th Home Buyer Tax Credit closing deadline in order to ensure that otherwise eligible home buyers are able to claim their credit.
This is absolutely a good idea, and Congress should indeed extend the deadline. This has nothing to do with enlarging the pool of eligible home buyers, since the contract deadline has already passed. Rather, it’s simply a recognition of the difficulty many qualified home buyers are going to face in getting closed by the end of the month.
Anyone in the real estate business can tell you about the challenges in meeting a closing deadline, and the potential last minute hiccups that can derail a closing. Most significantly, very few real estate transactions involve a “hard” deadline in which the parties absolutely HAVE to close by a particular date. Although parties can insist on a “time of the essence” clause in a contract to require closing on a particular date, few people actually utilize such clauses.
Why? Because the ability to meet a closing deadline is usually out of the hands of most buyers and sellers. Instead, your ability to meet a closing deadline can depend on last minute lender requirements (“oh, we now need your paystubs from 2005…”) or late-discovered problems with the title (last minute liens placed on the property, open building permits). Usually, these are not problems that buyers and sellers can anticipate.
Moreover, in the market we’ve had over the past few years, a large percentage of home sales involve short sales, in which the seller is not really the determining factor anyway. Instead, there’s a loan mitigation department at the owner’s mortgage bank that has to decide whether to give final approval to a sale that will leave the bank short.
Finally, I would love to see an extension of the credit simply to take the pressure off the industry. The June 30th deadline is certainly a lot better than the November 30th deadline from last year, which would have fallen on the Monday after Thanksgiving and ruined a lot of holidays. But any summer deadline is going to be complicated by vacations, particularly by the fact that the Independence Day holiday is but a few days after the deadline. It would be nice if people in the real estate industry who will be consumed with getting deals closed by June 30th could get a break, and be able to maybe take a vacation. That might be a little self-serving, but everyone is better off if the industry can close this huge pipeline of transactions in an orderly process over the next few months.
