Replies to This Discussion

Permalink Reply by James Lockard on April 27, 2010 at 11:57am

In NJ you need a signed contract by both the buyer and the seller. I am sure this would be the same in most states. The challenge will be getting it closed before June 30.

Permalink Reply by Elva Branson-Lee on April 27, 2010 at 12:42pm

Hi James. The problem is that the lender apprvoal is a contingency. Could that be interpreted as not quite being under contract since there is still a contingency to be removed? Does the transaction have to have opened escrow?

Permalink Reply by Bryant Tutas on April 27, 2010 at 12:55pm

Elva, A contract also has contingencies related to financing, inspections, survey, appraisal, clear title and insurance to name a few. Saying a contract is not a binding contract because it is contingent on 3rd party approval holds no water. Once the buyer and the seller have a meeting of the minds, consideration and put it in writing....the contract is valid and binding. But of course this is just my opinion :) The IRS may disagree.

Permalink Reply by Arthur Chatroo on April 27, 2010 at 1:13pm

I suggest you go to the IRS website (www.irs.gov) and look at the instructions for Form 5405 (which is the form that needs to be filed to claim the credit.)

In connection with a transaction that closes after April 30, but before July 1, those instructions note that only the pages of the contract that show: the date of the contract; the purchase price; the names of all the parties; and the signatures of all of the parties; need to be attached to Form 5405 (in addition to the final HUD1)
.
Thus, from the instructions, it would appear that the other terms (i.e., the contingencies) are not a factor (although I suspect that, e.g., an option contract, would still not qualify.)

Of course, with the IRS you never know, and its possible that they do not have a final policy on this issue.

So, its probably wise to contact a tax professional for their opinion, and go from there.

Permalink Reply by Elva Branson-Lee on April 27, 2010 at 2:13pm

Broker Bryant and Arthur, thanks. This is the way I see it, too. We all agree on what constitutes a binding agreement, but who knows how the IRS will see it. I would like to reassure my short sale buyers and their agents, but cannot find the definitive answer on this. Probably because it does not yet exist.

Permalink Reply by Elva Branson-Lee on April 27, 2010 at 2:27pm

I will send them all the forrm (5405) and let them read it for themselves. Thanks, guys. This has been helpful.

Elva Branson-Lee said:

Broker Bryant and Arthur, thanks. This is the way I see it, too. We all agree on what constitutes a binding agreement, but who knows how the IRS will see it. I would like to reassure my short sale buyers and their agents, but cannot find the definitive answer on this. Probably because it does not yet exist.