Home Buying in Springfield>Question Details

Thomasina, Both Buyer and Seller in Springfield, MA

Do I qualify for $6500 tax credit? Can I do home inspection before the bank (short sale home) signs purchase & sale?

Asked by Thomasina, Springfield, MA Fri Dec 18, 2009

I put a bid on a short sale property from Bank of America & my offer was accepted. I signed the purchase &sale 2 months ago, but am still waiting for the bank to sign it (I have heard BOA takes FOREVER to close) . I am trying to expedite this process as much as possible because I want to qualify for the $6500 tax credit (I am a previous home owner). I have 2 questions:

The purchase and sale I signed was done in October. Because the new tax credit of $6500 did not go into effect until the beginning of November, does this mean I do not qualify, even though the bank has not signed the purchase and sale yet?

Also, because the house is a short sale I am aware that no repairs will be made. Can I do a home inspection now, before the bank signs the purchase and sale, so that if there are items wrong with the house that I do not want to fix I am not waiting until it is too close to the June 30th deadline that I am unable to find another house in time to get the $6500 tax credit?

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Answers

6
Speak to your tax accountant about the $6500 tax crediot,Speak to your realtor. If your realtor is a shortsale specialist , they should be able to provide you with the steps pertaining to a shortsale.
0 votes Thank Flag Link Sat Dec 19, 2009
Speak to your Tax Consultant--Credit is expanded to grant up to $6,500 to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010; must be the next primary residence and current owners must have lived in the house for 5 consecutive years during the past 8 years. You will need an executed contract before May 1, 2010 and must close the deal before the end of June 2010. Income limits are the same as first time buyers. Credit can only be claimed for a primary residence bought for less than $800,000 and buyer must live in the house for 3 or more years after purchase or credit will need to be paid back—check IRS Code for qualifying conditions. As far as the inspection what is your Realtor advising you to do? Keep in mind the bank can accept, reject or counter--
0 votes Thank Flag Link Fri Dec 18, 2009
First of all, Bank of America will not sign the contract if it is a short sale. The seller signs the contract and Bank of America has to send a letter saying that agree to the short sale sales price. I would not spend the money on a home inspection until you have a short sale letter of approval from Bank of America. There is always a possibility that something could happen that causes Bank of America not to approve the sale. I know it can several months to get a short sale offer accepted but I have never heard of getting accepted and taking two months or more to get the short sale approval letter. You do not have a contract yet so can walk away from this home if you feel that you are running out of time as long as the short sale approval letter has not been sent to you yet.

Also, as Al said, the IRS looks at the settlement date or purchase date for qualifying for the tax credit so you should be fine there as long as you meet the other IRS criteria.
0 votes Thank Flag Link Fri Dec 18, 2009
As Scott said, please speak to your tax pro to confirm.

The IRS views the purchase date in your case as the qualifying date for the tax credit-not the contract date, so you are good to go as long as you've owned and lived in your primary residence for five consecutive out of the last eight years and you close by June 30.

Even if the seller allows you to make repairs it is unadvisable. You haven't even gotten off the ground yet because the bank hasn't signed yet. Once you get closer and you see everything is falling in place (mortgage, bank approval, etc,) it would make more sense as long as it is not too costly.

Hope this was helpful.

Good luck.
0 votes Thank Flag Link Fri Dec 18, 2009
Hi Thomasina! Review the requirements at: http://www.federalhousingtaxcredit.com. If you have any questions, please contact me. I would be happy to help you! Ann
0 votes Thank Flag Link Fri Dec 18, 2009
You'd probably have to consult with a tax professional or your lawyer for a legal opinion of your options with the short sale, closing and tax credit. It's very individual and you have to make sure you satisfy all the conditions exactly.

Check back with us and let us know how things progress,

Happy Holidays
Web Reference: http://www.MedfordHouse.com
0 votes Thank Flag Link Fri Dec 18, 2009
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