Congress is considering an extension for would-be homebuyers who are racing to close home sales in order to receive a federal tax credit.
The real estate industry has warned that tens of thousands of buyers who rushed to buy homes to qualify might not close before the deadline imposed by Congress, meaning they could miss out on receiving credits worth thousands of dollars without action from lawmakers.
Last fall, Congress extended an $8,000 tax credit for first-time homebuyers and added a smaller $6,500 credit for current homeowners who were buying a primary residence.
To qualify for the credit, buyers had to sign contracts by April 30 and close on the transaction by June 30.
But there are so many transactions in the pipeline that the companies responsible for handling the sales, including mortgage lenders, appraisers, title insurers and real estate brokers, say the last-minute homebuying rush in April has created bottlenecks.
On Thursday, Senate Majority Leader Harry Reid, D-Nev., said he would back a measure to extend the June 30 closing date to Sept. 30 for buyers who had met the April contract deadline.
The National Association of Realtors estimates that between 55,000 and 75,000 homebuyers who are under contract will not be able to close in time to claim the tax credit.
The trade group is lobbying Congress to extend the June 30 deadline only for buyers who met the April target.
One particular worry is that short sales, where a lender allows a home to sell for less than the amount owed, will not receive requisite approvals in time to meet the closing deadline. Unlike normal sales where only two parties — the buyer and the seller — negotiate the price, short sales are more time-consuming affairs because they require noteholders to agree on price.
Real estate agents said that even "plain vanilla" transactions are increasingly at risk.
Response times from loan officers and appraisers have doubled over the past month, said Kailee Rainey, who works at a Seattle real estate brokerage.
"The lenders are overwhelmed. The title companies are overwhelmed," said Lee Barrett, the president of Century 21 Barrett, a real estate firm in Las Vegas. "It's just a mad surge of everybody trying to close deals."
At Wells Fargo & Co., employees from other sales divisions are being brought in to handle mortgages, and the staff is working weekends and nights to process higher volumes.
"It's all hands on deck," said Greg Gwizdz, an executive vice president at Wells Fargo Home Mortgage. He said the lender has prioritized "every customer who qualified for the tax credit."
A spokeswoman for Bank of America Corp. said the company is also placing "increased priority" on loan applications submitted before the April 30 deadline.
Luke Hayden, the president of PHH Corp., a Mount Laurel, N.J., lender, said consumers can help speed the process by being "very responsive to requests for documentation" from lenders.