Salt Lake City UT
CRS, ABR, GRI, CNHS, e-PRO http://www.athomeutah.com http://www.therealestatereportcard.com
HOWEVER, from a more practical perspective, my experience with clients collecting the tax credit leads me to believe that if you have a deal where the buyer's qualify for the credit based on being first timers, income, etc., the sale closes by June 30th, and the contract is dated by April 30th - the IRS is highly, highly unlikely to reject the credit on grounds that the contract was not binding if all else is met. As a matter of fact, the IRS does not request to see any sort of approval letter from the bank, and the short sale contract does not have a place for the bank to sign, so on a contract that was executed by the parties by the deadline but did not have bank approval by that time, there's nothing "missing" from the contract that would render this an issue.
That said, the IRS does audit claims of the tax credit A LOT, but less now that they are requiring the HUD-1 to be submitted with the tax return. The fraud cases tend to be around people who didn't meet the guidelines for qualifying as a first-timer or a move-up owner who has lived in their home for the requisite period, or people who simply never actually bought a house (i.e., never closed escrow).
And here's the other thing - buyers who want the credit, in general, should be referred to their CPAs for a definitive opinion about whether they qualify! Sounds like that's the route you ended up taking, Rain, and wisely so.
1. Lauren asks....Do you consider a listing to be "under contract" when you have an offer submitted to the bank (prior to approval)? Dan says "No. I don't consider it to be under contract." Well, why not? (a reader or Lauren might ask....LOL!). Well, the answer is twofold. part a, if you will....When a property goes under contract and the status gets changed on the MLS to under contract, it disappears from the public view. According to rules and ethics from the National Association of REALTORS and the local MLS, the seller can no longer market the property to anyone else once they have engaged a buyer and accepted a binding contract. Even though the contract may still have some contingencies, it's status is updated or changed to "under contract" and removed from further public consideration. Because of the volatility and uncertainty involved in selling AND buying a property where the seller is attempting one or more short payoffs to one or more entitites, the National Association of REALTORS has ruled that
a. A seller may be under contract with only one buyer at a time(hence the recent creation of the Backup position short sale addendum).
b. Because the outcome and time-frame of a short sale is so unpredictable, the NAR says the seller or buyer may cancel their contract at any time prior to 3rd party approval AND that the seller has the right to continue to market the property AND seek other offers. so.....
b. The property could not be updated to the under contract status because the seller has the right to still market the property and accept other offers! The seller could not continue to market the property if the property were under contract.
Caveat 1:.....the seller, if (he or she or they) chose, could tell the agent to place the property under contract, and cease to show it or take any more offers!
Caveat 2: the seller could cancel any offer at anytime in order to place a better offer that was accepted in backup position in first position. (more agents should urge their seller to do this). translated...more agents should uphold their fiduciary to the seller better than they do and those agents know exactly who I'm talking to....
So in conclusion.....
1. the short sale addendum allows the seller to be under contract with only one buyer at a time
2. the short sale addendum allows the seller the option of continuing to market the property, making it impossible to put the property under contract if the seller elects to continue to market the property.
3. A real estate purchase contract signed by the seller and the buyer is an enforceable, binding contract...whether the short sale addendum is part of it or not.
The status of a property on the MLS does not provide the evidence to the IRS for the tax credit,
IT IS THE SIGNED CONTRACT BETWEEN THE BUYER AND SELLER! AND/OR THE SETTLEMENT STATEMENT!
Again, go back and read the IRS web page.....
Oh, and by the way, I'm never too busy for any of your referrals!
801-288-2260 http://www.AtHomeutah.com http://www.therealestatereportcard.com
I think our question is still whether or not it's a binding contract until it's approved by the bank. Do you consider a listing to be "under contract" when you have an offer submitted to the bank (prior to approval)? I don't. I simply change the status on the MLS to "under 3rd-party review."
I will take what is printed on their website for what it's worth. It really doesn't have to be this hard.
taken from the link provided...
* You must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010.
* If you entered into a binding contract by April 30, 2010, you must close (go to settlement) on the home on or before June 30, 2010.
Salt Lake City UT
CRS, ABR, GRI, CNHS, e-PRO
Buyer and seller can cancel the contract at any time during a regular contract as well...it's called a contingency. So is the 3rd party approval. As far as the tax credit is concerned, I Still think it is more important that it closes before June 30th. If the conditions are met, then it Was a binding contract because it closed, If it doesn't close, it doesn't matter. You can't claim it unless you buy a house...it's that simple.
The determining factor as I understand it is that it must close by the 30th of June. What a short sale actually is is a real estate transaction between a buyer and seller with a Contingency of the approval by the bank. So, as long as it was under contract between the buyer and seller by April 30th and closed by June 30th, it should qualify for the tax credit. That's the way I see it.
Walker Realty http://www.AtHomeUtah.com http://www.TheRealEstateReportCard.com