Twin Cities realtors and buyers rush to close to meet tax credit deadlineby Annie Baxter, Minnesota Public Radio
St. Paul, Minn. — Home sales using the federal home buyer tax credits must close by this Wednesday, but tight lending restrictions and appraisal conflicts have meant a lot of those deals aren't likely to make it in time.
The National Association of Realtors estimates 180,000 of those deals nationwide may not go through, and it's pushing for a deadline extension. The federal tax break is up to $8,000 for first-time buyers and $6,500 for those buying again.
The realtor group supports extending the deadline for closing so that short sales, which have notoriously long processing times, can go through.
Short sales occur when a seller unloads a home for less than what's owed on the mortgage. Banks take a hit on short sales, and some real estate agents say lenders are still slow to sign off on them.
Craig Arveson, 27, signed a purchased agreement in early April to buy a short sale 4-bedroom home in Brooklyn Park for $150,000. But one of the seller's lenders has yet to approve the short sale. That means Arveson might lose out on the $8,000 credit if he can't close in the next three days.
"Every time we get the feeling that everything's going to head in the right direction we just end up waiting longer and longer and longer," said Arveson. "It's just a frustrating process."
The hold-up could also make Arveson miss the deadline for a nearly $3000 property tax exemption he's eligible for as a disabled Air Force veteran.
Arveson's real estate agent, Melissa Melnick, said she's working hard to make the deal go through
"Lately I've been calling every day to see what's going on, to see if we can get things through," she said.
Brad Fisher, the president of the Minneapolis Area Association of Realtors, said problems like Arveson's aren't widespread in the Twin Cities.
Fisher said the push from the national Realtor group to defer the deadline mostly comes from states where the housing market has been hit harder, and where the sales pipeline might be more clogged.
"I don't think we're affected nearly as much as a lot of the states like Nevada or California or Florida where they've had different reactions to this market-- more extreme than we have," said Fisher.
But even local real estate agents say generally speaking, there are a lot of problems in the market that could threaten deals. Jim Tice, with Century 21 Realty in Edina said appraisal guidelines are being more rigid, that affect the price.
"I've certainly heard of protracted transactions because of underwriting and appraisal problems," Tice said.
Tice said many appraisals come in lower than the purchase price, which can delay or kill a deal. Tice says that's happening frequently with home sales at his office. And even when the appraisal is fine, Tice says homebuyers might struggle to secure financing anyway.
"The extreme of lax and ridiculously loose standards in the subprime era have now led to what I would almost characterize as paranoid lending," said Tice.
Tice believes excessively tight credit is hurting the housing recovery, just as the market is losing an important crutch. The latest housing numbers indicate home sales fell off dramatically after the federal tax credits expired.
Critics maintain the tax credits weren't necessary in the first place, because sales would go forward anyway-- just later.
Craig Arveson might be evidence of that. He hopes his home purchase will close in time for him to still get the $8000 tax credit. But missing the deadline may not thwart him.
"If I don't have any other choice, I think I'll push through and try to get it closed anyway," he said.
Arveson has until Wednesday night at midnight to complete his home sale and get the credit.
- Morning Edition, 06/28/2010, 7:20 a.m.