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Will the Home Buyer Tax Credit Extension Help?

By Phoebe Wills

While most real estate professionals fought for this extension, it may not be the savior we hoped for. The fact is, many first time buyers who could qualify bought during the first round. Are there many buyers left who have a job and the credit qualifications? That question will be answered over the next few months. We are coming into the notoriously slow time of year for real estate sales. Will this extension make a difference?

Contracts are taking from six weeks to two months to close. Several of my recent sales have involved first time home buyers. Some lenders allow the buyer to get a bridge loan for the 8,000 dollar tax credit in order to use it as part or all of their down payment. The buyer agrees to pay off the bridge loan when they receive the refund on their 2009 tax return.

Part of the new extension is a tax credit of 6,500 dollars for buyers who have lived in their home five or more years. This sounds great, but in the current economic climate, that could prove difficult. Most offers to purchase would be contingent on these buyers selling their existing home. Sales are down and the influx of foreclosures makes it a buyer’s market.

If the potential “move up” buyers cannot sell their existing home and close on the new one within sixty days of the extension deadline of April 30, 2010, they cannot receive the tax credit. This is a six month extension. The average time a home is on the market before selling is often six months or longer. Is this tax break realistic for buyers who have to sell before purchasing?

I am for anything that will help the housing market. The problem is the credit crunch. If buyers cannot qualify under the new stringent requirements of lenders, they cannot purchase a home. The lax lending standards of the last few years needed to be addressed, but the pendulum has swung too far in the other direction. New lending regulations have stymied the purchase of any high dollar item. A few years ago, the lending mantra of “No money down”, caused many potential buyers to stop saving for a down payment. They were led to believe they would not need one. Now they do.

There is nothing in this new bill to spur investors. Instead, lenders tend to put so many restrictions on investors that they are on the fence and likely to stay there. If an investor has the means to purchase a distressed property, they should be allowed to do so with no restrictions as to when they can sell it. Our government tends to punish us all for the sins of a few. If investors could purchase these foreclosures at auction, it would save time and money for everyone involved.

One part of this new bill that has not received a lot of attention is the tax break for small business. If a small business paid taxes on profits made in the last five years, but is showing a loss for 2009, it can receive a credit for some of the taxes paid during better times. Since the real estate industry as a whole has taken a significant hit during this down turn, it could help some of the businesses that are struggling.

Phoebe Wills is co-owner and Principal Broker of Autumn Ridge Realty. She has been in the real estate profession for nine years in the greater Knoxville, Tennessee area. Visit her web site at

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