President Barack Obama on Friday signed a law giving consumers already in the process of buying a home three extra months to close the deal and still get a popular tax credit from the government.
Homebuyers with contracts signed by April 30 who failed to go to closing by the original June 30 deadline will now have until September 30 to complete their purchases.
The measure is meant to support the battered U.S. housing market which still faces tough headwinds despite low mortgage interest rates.
The Senate late Wednesday approved the measure just hours ahead of the earlier deadline and one day after House of Representatives quickly approved the measure.
The $8,000 tax credit for first time homebuyers and $6,500 credit for others purchasing a new primary residence was a highly popular temporary measure by the Obama administration to jump start home sales during the economic recession.
The Senate had earlier tried to extend the deadline but failed amid partisan bickering over unrelated legislation.
Real estate agents said as many as 180,000 homebuyers would miss the June 30 deadline because banks and settlement offices were struggling to deal with the volume of people rushing to close on their deals signed before April 30.
Critics say the three-month extension is an invitation for fraud, providing prospective home buyers time to back date contracts to a date before April 30 and subsequently closing on those contracts by the new September 30 deadline.
The IRS reminds taxpayers that special filing and documentation requirements apply to anyone claiming the homebuyer credit, the Internal Revenue Service said.
Senate Majority Leader Harry Reid, who faces a tough re-election fight in November in Nevada, where the U.S. foreclosure crisis is most pronounced, pushed for the three-month extension.
The National Association of Realtors on Thursday said contracts for pending home sales fell by a record 30 percent to an all-time low in May, the first month of sales without the homebuyer tax credit since it was introduced two years ago to spur housing demand.
Hampering a recovery in the housing sector is a weak jobs market.
The Labor Department earlier on Friday said overall employment fell for the first time this year in June as thousands of temporary jobs ended.
(Reporting by Corbett B. Daly; Editing by Andrew Hay)