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Banks' delays threaten $8,000 tax credit for many home buyers

About 130 of broker Craig Beggins' 189 pending home sales contracts are short sales. • They are the type of transaction that closes only if lenders waive part of the unpaid mortgage balance, a process that can take months for some banks to approve. • But a huge segment of the local home buying market can't wait that long. They are eager to tap the government's $8,000 First-Time Home Buyer tax credit, which expires at the end of November. • "A lot of the short-sale buyers are first time home buyers. Now they're in a time crunch," said Beggins of Century 21 Beggins Enterprises in Apollo Beach. "The chance of 130 of our short sales closing by Nov. 30 is nonexistent." • That's what happens when two parts of the home buying machine fail to work in synch. With anywhere from one-third to one-half of Tampa Bay home sales going the short-sale route, accessing the $8,000 tax credit can be problematic. • To be sure, the tax credit wins nothing but praise from Realtors, house hunters and home builders. The credit is for first-time home buyers, defined as those who haven't bought a home for at least three years. It was included in the federal stimulus program passed in February and applies to homes bought from Jan. 1 through Nov. 30. • Unlike last year's $7,500 home buyer tax credit, this year's giveaway doesn't have to be repaid as long as you keep the home as your primary residence for three years.

Even if you owe no taxes in 2009, the government will send you a check.

An estimated 1.4 million home buyers across the country, including 106,000 in Florida, have claimed the credit already. But with the deadline less than two months away — and little indication so far that Congress will extend the freebie — real estate agents and home builders are warning buyers away from shilly-shallying with the bank.

"I don't do short sales and foreclosures. The lending institutions are too difficult to work with," Tampa Realtor Sue Paskert said. "It takes forever to get it done. I've tried to encourage buyers to stay away from them and find motivated sellers."

That's the advice home buyer Sheray Sharby took. When the single mother of a young son started her house hunt earlier this year, looking to claim the $8,000, the Air Force master sergeant bid on two Hillsborough properties. One was bank-owned. The other was a short sale. In both cases, the sales wouldn't close without bank consent.

Spurned on both deals, Sharby found a nonforeclosure home in Gibsonton's Kings Lake neighborhood, giving the seller 12 hours to accept or reject her $136,900 offer. The seller accepted.

"Now I've got a place for my little guy and myself. I was tired of living in apartments," she said. "The tax credit is a good idea. Something's got to be done. Sales have picked up. I notice a lot of houses I was looking at have been sold."

Home builders face similar time crunches if they want customers to tap the government dough. David Pelletz, regional president with Standard Pacific Homes, has marketed unsold, completed homes in places like the Asbel Creek and Country Walk communities in central Pasco County.

Waiting the typical four months to build your home from scratch just won't work if the tax credit's an issue.

Lennar, another major player in Tampa home building circles, launched a Web site to promote the government giveaway under the slogan "8,000 reasons why now is the time to buy."

"Through the summer, we definitely had a rush of people. We estimated it's created about 30 percent of sales," Pelletz said of the credit. "If the house isn't started already, it isn't going to make it to the deadline."

Some states, including Florida, have sweetened the deal even further.

They created a cash advance program so home buyers could use the credit for their down payment instead of waiting to collect next year after filing 2009 taxes.

In early August, the state released $30 million toward the Florida Home Buyer Opportunity Program. Pinellas, Hillsborough, Pasco and Hernando counties share $2.7 million of that money, enough to finance 335 home purchases at $8,000 apiece.

"People don't always have money at the closing," said Hills­borough Realtor Lisa Mann. "Some people just need the extra help to get in. Most of them are paying more rent than it costs to get a house. It's the down payment and closing money that prevents some buyers from owning."

Pinellas Realtor Tom Loulakis is a big proponent of the tax credit, but is pulling his hair out over bank inaction on short sales. The National Association of Realtors is lobbying for an expansion and extension of the credit, arguing that Nov. 30 is too soon to call it off.

"They're ringing my phone off the hook: 'Can you get this closed before the credit closes?' '' Loulakis said. "Unfortunately, the banks are unreliable on short sales. Some take seven weeks. Some take seven months."

Extension seems unlikely

Home builders and Realtor trade groups have bombarded Congress with requests to extend the tax credit, but legislators, already reeling from accusations of budgetary extravagance, have yet to commit. Realtors even suggest expanding the credit to $15,000, which critics argue is a blatant special interest handout. Congress' silence has a purpose: The credit was meant to spur home purchases in 2009, and premature talk of extending the giveaway into 2010 might encourage home buyers to postpone purchases.

Banks' delays threaten $8,000 tax credit for many home buyers 10/02/09 [Last modified: Friday, October 2, 2009 7:07pm]
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