FIRST-TIME HOMEBUYER CREDIT CLOSING DATE EXTENDED TO SEPTEMBER 30, 2010

July 28, 2010 – 9:57 am

The Homebuyer Assistance Improvement Act of 2010 was signed into law on July 2, 2010. This legislation was enacted in response to the backlogs of lenders and federal programs providing mortgage loans which, in turn, has caused a delay in processing loans. This legislation is designed to provide relief to those homebuyers who meet the requirements to claim either the firsttime homebuyer or the long-time resident credit, but were prevented from doing so solely because they could not get closed on the home under contract before July 1, 2010.

The extension allows taxpayers who entered into written, binding contracts before May 1, 2010 that were scheduled to close before July 1, 2010 an additional three months to close on the home under contract and remain eligible for the credit. Although they must now close before October 1, 2010, the written binding contract must specify that the purchase was to be completed before the original July 1, 2010 deadline.

Example 1: A written, binding contract entered into on March 31, 2010 specifies a closing date of September 15, 2010. The contract was not a qualifying contract under prior law because the closing date was after June 30, 2010. Further, the taxpayer’s eligibility for the credit is not changed by the closing date extension. This contract is not a qualifying contract because the closing date was not originally scheduled to occur prior to July 1, 2010.

Example 2: A written, binding contract entered into on March 31, 2010 specifies a closing date of June 20, 2010. Because of a backlog in loan processing, the taxpayer was unable to close on the home under contract until September 15, 2010. Assuming all other requirements are met, the taxpayer is eligible for a homebuyer credit.

Documentation requirements. In response to the new legislation, the IRS released IR-2010-80, which explains the additional documentation requirements that are necessary to claim the credit. In addition to attaching a HUD-1 or equivalent settlement statement, taxpayers who are claiming the credit for a home purchased after April 30, 2010 must also provide a copy of the pages of their written, binding contract which must state that the purchase will be completed before July 1, 2010. In addition to the closing date, the pages submitted must also show the names of all parties, their signatures (if required by local law), the property address, the purchase price, and the date of the contract.

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