Home Buying in 85226>Question Details

Goodboy, Home Buyer in 85226

Impact of possession and closing date on first time homebuyer credit

Asked by Goodboy, 85226 Sat Oct 3, 2009

My closing date is end of October, but the seller wants a few more weeks more for his move. I want to close at the end of October, but I was wondering if there was any alternative (rent for example) to allow the seller to move out early November. In this case, how will it impact my first time home-buyer credit, since I am qualified for this.

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William Smith’s answer
I agree with the last answer and you may work yourself into a bad posititon. In addition to the 1st time credit, you need the seller to have legal coverage for you: possession and insurance coverage for example. Best advice it to talk to your lender and accountant. I believe they will both want you to move in at close of escrow and not later.
I'm licensed in Az and Ca but this is a tax issue as much as a real estate question.
0 votes Thank Flag Link Sun Oct 4, 2009
Goodboy,

There are many risks to allowing this situation for you so I would consider this carefully before allowing this scenario to occur. For example:

- What if the seller doesn't move when they say they will?
- What if something breaks while the seller is still in the home? Who pays? How do you prove it?
- What if the seller or guest of seller has an accident and gets hurt in the home? What is your liability?
- Can you get insurance for a short term renter if you bought it as an owner occupied?
- What if the seller damages the home while moving out after you've already purchased it? Who pays for repair?
The list goes on and on...

The cleanest way is to have the owner move out before COE so you can perform your final inspection before you commit to providing all the funds. Is it possible both of you to agree to a later COE date? The tax credit is good through Dec 1 2009, so you still have some time. Make sure you work with your lender to see how this can impact your loan and any loan rate locks you may have.

Best wishes...
1 vote Thank Flag Link Sun Oct 4, 2009
GB,

This is a tricky situation if the person you are potentially trying to lease or rent back to is the previous owner of the home and is in hardship.

There may be some resentment on the homeowners side of the transaction so be very careful.

Consult with your Realtor to properly execute this type of situation.

Otherwise there may be hidden exposure as has already been pointed out.

Best of Luck to you,

Stew Keene - Homesmart

"My only goal is to help you so we can help each other"
Web Reference: http://foreclosures.az
1 vote Thank Flag Link Sat Oct 3, 2009
I gather your question concerns your First Time Homebuyer (FTHB) credit status in the eyes of the IRS if you rent out the house for a couple of weeks before you move into the your new home. Stew Keene hit the nail on the head when he said that this is a tricky situation.

According to the IRS, the FTHB credit is for buyers who have not owned another principal residence at any time during the three years prior to the date of purchase, and are buying a principal residence. The tricky situation here as I understand it, is that you are letting someone else stay in the home you are buying, in return for some type of compensation.

I have an opinion, but it is just that, an opinion, not fact. I would suggest you check with a CPA to tackle this question for you.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
(480) 422-5095 Direct
Web Reference: http://www.ezAZloan.com
0 votes Thank Flag Link Sun Oct 4, 2009
Also, here's a link for lots of Q&As for the tax credit:

http://www.irs.gov/newsroom/article/0,,id=187935,00.html
0 votes Thank Flag Link Sun Oct 4, 2009
Agree with jay but your agent will handle all this..... why i don't like FSBO. They have no idea what goes into selling.

Who is paying insurance??? What happens if you can't get seller out? Always scares me when they want to stay... I can see 48 hours with insurance approval.....

Not sure it would mess up buyer credit, ask the closing attorney. Your agent will have you all sign occupancy after closing doc. and put in a bunch of other required info. to protect.
0 votes Thank Flag Link Sat Oct 3, 2009
You could close at the end of October and have the seller rent back from you. Even if you close the middle of November you are OK. The last day to close on the house is November 30, 2009.
0 votes Thank Flag Link Sat Oct 3, 2009
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