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Home buyers facing deadline for tax credit

home for saleTime is running out for qualified home buyers to take advantage of the 2010 home buyer's credit. First-time and existing home buyers have until this Thursday, September 30, 2010, to close on their purchases in order to take advantage of the credit. The original version of the credit had a June 30, 2010, deadline, but Congress pushed through an extension after complaints from Realtors, mortgage brokers and taxpayers.

This doesn't mean you can rush right out and sign a contract today. Under the law as extended, homeowners must have entered into a bona fide sales agreement to buy a new home by April 30, 2010. However, in order to qualify for the credit, home buyers have until September 30, 2010, to close on the deal. The extended deadline does not affect the criteria for the credit; it otherwise remains the same.

An estimated 200,000 taxpayers were thought to be affected by the original June 30, 2010, deadline, which sent Congress scrambling to extend it. Initial reports indicated that up to 80,000 taxpayers were at risk for losing the credit with the June deadline because of difficulties closing due to obtaining a mortgage. However, that estimate was pushed up because of the number of short sales which were pending. A short sale happens when the sale price of a house is less than what is owed on the property. As a result, it can be difficult to clear the sale until the obligations are either paid off or the bank is satisfied that it will be paid off at sale.

The amount of money at stake for taxpayers was significant: The available credit is up to $8,000 for first-time home buyers and up to $6,500 for existing home buyers. Realtors claimed that the availability of the credit was pushing the sales of homes upwards (though, realistically, the data didn't necessarily support those assertions). What is clear, however, is that with the housing market making a shaky recovery, without an additional extension, this might be the last of the home buyer credits that taxpayers see for a while.

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