Tax Credit Extension

During a late session, the United States House of Representatives approved a bill to extend tax credit for new home buyers. This is an extension of a law signed by President Obama last year to stimulate real estate markets around the country. The bill is designed to help potential buyers who entered into purchase agreement by April 30th of 2010.

The original law provided $8,000 tax credit for new homeowners who were able to close their real estate transaction by June 30th of 2010. In addition, the bill provided$6,500 in tax credit for home owners who are seeking to purchase a second property. For both new home buyers and existing home owners, the new bill extends the deadline to September 30th of 2010.

Most analysts predict President Obama to sign the bill into law. Originally, the bill met resistance on the House floor as it was part of another bill extending unemployment benefits. After both bills were separated, House passed the bill with majority support from both parties. The Senate approved the stand-alone bill after separating it from the unemployment benefits extension bill.

The passage of the new bill will greatly influence the real estate market as buyers will have another incentive to better their offers. The original 2009 law increased real estate sales for the first time since the beginning of the subprime crisis in 2007. Potential buyers are still required to make an offer with at least 15% as a down payment.

Furthermore, due to the shaky real estate values, many lenders are requiring a secondary appraisal before closing the transaction. Lenders are also requiring potential buyers to submit extended packages to prove their employment history and financial capabilities. This effort is directed at re-establishing trust in the American borrower as lenders seek foreign capital to fund the American housing market.

In the current market, short sales are the hottest product. Most new home buyers are trying to cash in on this once of lifetime opportunity, as real estate prices and interest rates are at a historical low point. Moreover, many potential investors are engaging in package purchases, where a group of investors submits an offer for a package of bank owned real estate owned by one financial institution.