Amendment would extend escrow deadline for homebuyers who qualified for tax credit

Homebuyers bumping up against the June 30 deadline to close escrow for the federal tax credit may get a 90-day reprieve if things go their way on Capitol Hill.

Sen. Harry Reid, D-Nev., introduced an amendment Thursday that would extend the deadline to Sept. 30, a critical move for those involved in short-sale transactions, or homes sold for less than the value owed.

Short sales, which account for about 30 percent of home sales in Las Vegas, must be approved by the lender, a process that typically takes four to six months. There is a growing concern that many of the home purchases would not be completed before the deadline because of the time it takes to complete those transactions.

"The first-time homebuyer tax credit was very popular and successful in Nevada," Reid said in a statement from Washington, D.C. "In addition to making it easier for thousands of Nevadans to purchase their first home, it helped reduce the sitting inventory of homes."

The Greater Las Vegas Association of Realtors reported 21,143 homes on the Multiple Listing Service in May, though the number of homes available without offers is 8,049. Home sales have shown significant year-over-year gains since early 2009, dropping off in April and May.

"By extending the transaction deadline, we can ensure that everyone taking advantage of this credit can complete the purchase of their new home," Reid said.

First-time homebuyers qualify for up to $8,000 in tax credit, while move-up buyers get $6,500.

The tax credit has provided stability to the Las Vegas housing market and has helped people achieve the American dream of homeownership, a key to financial stability, said Rep. Dina Titus, D-Nev.

Her office reported that 25,446 Nevadans have collected $186.2 million from the tax credit program, which was critical in providing assistance to the devastated housing market.

Short sales have become an alternative to foreclosures in Nevada, where one in 79 households received a foreclosure notice in May, reported RealtyTrac, an Irvine, Calif.-based listing service.

Lenders with a large inventory of homes in default are able to avoid the costly and lengthy foreclosure process and reduce risks associated with owning a vacant home. Sellers can avoid foreclosure and buyers can pick up a home below market value.

Las Vegas housing analysts estimate there are 11,000 homes in escrow, including 4,000 to 5,500 that qualify for the tax credit. The homes had to go to sales contract by April 30.

"Many of these first-time homebuyers calculated the savings they were expected to receive through the tax credit into the decisions about whether or not to purchase the home," Titus said in a June 8 letter to the House Committee on Ways and Means.

Rick Shelton, president of the Greater Las Vegas Association of Realtors, said there's always some amount of "slippage" from contingent and pending home sales, or homes sales that fall out of escrow, but it's usually a minuscule percentage of the entire number.

While the percentage of short sales is increasing in Las Vegas, the failure rate is higher than 50 percent. Nevada Title Co. reported 807 short-sale escrow closings in May, compared with 1,207 that failed. And 9,225 are in escrow.

The percent selling remains somewhat depressed, but is moving up. In May 2009, the percentage of short-sale closings was 8 percent. A year later it climbed to 30 percent.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.