It appears that the first time homebuyers credit is close to renewal, but the question is, what will the terms be?

Under a new Senate proposal, the $8,000 credit for first time buyers will be extended to cover purchases into the spring of 2010, but buyers must sign contracts by April 30 and close within 60 days. The plan would also extend the program by incenting current home owners to buy a new home. They would receive up to $6,500 for purchase of a new home if they have lived in their current home for five consecutive years out of the last eight. It would also raise the income level for qualification from $75,000 for singles, to $125,000 and from $150,000 for couples to $225,000.

Keep in mind this credit applies only to principal residences, not to second or vacation homes.

For more information, see the Wall Street Journal article by clicking here.

According to the Wall Street Journal, the IRS is currently investigating more than 100,000 suspicious claims for the first-time homebuyer credit. This is not good news for those who hope that the credit will be expanded past the current November 30th expiration.

More than a million claims for the credit have been received so far, and housing industry experts have estimated that it has generated more than 350,000 home sales that wouldn't have otherwise occurred. But there is revealing evidence that shows that a large number of these claims are unjustified, or even fraudulent.

The IRS has stated that it is investigating 167 "criminal schemes" involving the credit, and that the IRS will "vigorously pursue those who filed fraudulent claims" for the credit.

The credit has some fraud issues largely because it is a credit that is not claimed at the time of sale, rather people have to file or amend their tax returns in order to obtain the credit.

Still, industry groups are pushing to keep the credit in place. The National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association have all called for a 12-month extension of the credit. They have also asked that it be extended to all home buyers, not just first-time home buyers.

One proposal by Sen. Johnny Isakson (R.-Ga.) and others to extend the credit would make it available to all home buyer through June 2010 and would carry a price tag of about $16.7 billion dollars. That proposal would also raise the income ceiling to eligible home buyers who are single with an income up to $150,000 and for couples up to $300,000. Currently the credit is only available to singles up to $75,000 and couples up to $150,000.

The debate continues over whether the first time homebuyers' credit should be extended, expanded or both, according to the Wall Street Journal.

Lawmakers are voicing various concerns over what the credit is eventually going to cost taxpayers.

Leading proponents of the credit would like to extend it at least to next summer, and make it available to all home buyers. They also want to raise the income limits to $150,000 for an individual or $300,000 for a couple. That would cost about $16.7 billion. Currently, the credit phases out for individuals earning more than $75,000 and married couples earning more than $150,000. To keep the credit alive, some lawmakers are considering ways to offset its cost, for instance, by taking back unspent funds from the $787 billion stimulus bill.

Many lawmakers want to see some sort of proof that the credit is also stimulating the job market as well.

Ted Gayer, a scholar at the liberal Brookings Institution, argued in a recent paper that the credit costs the government about $43,000 for each additional home sale it produces. That is because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Only about 350,000 were additional buyers. Expanding the credit to make all home buyers potentially eligible would swell the government's cost per additional home sale to more than $250,000, said Mr. Gayer, co-director of economic studies at Brookings.

Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

"It drives me up a wall," says Robert G. Hertzog of Summit Home Consultants in Phoenix. "[The bank is] holding my client hostage."