First Time Homebuyer Tax credit - What is a Binding Contract?

Homes For Sale In Wichita Ks - First Time Homebuyer Tax credit - What is a Binding Contract?

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The legislation that authorizes the First Time Homebuyer Tax credit states that a Buyer must have signed a "binding contract" by April 30, 2010. Now that we are fast approaching that date lots of questions are surfacing as to what will be thought about a "binding contract". I have attempted to explore the Irs page about the tax credit and the documentation requirements essential to get the refund. So far I have found nothing that requires a submission of copy of the covenant to secure the credit; only a copy of a signed Hud settlement Statement dated on or before June 30, 2010 and the new Irs form 5405.

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Homes For Sale In Wichita Ks

I am not a tax professional or attorney. It is always recommended to consult an attorney or a tax professional about these issues.

It is only my personal plan that Irs will think it a "binding contract" if all parties to the covenant have signed the "Offer to Purchase" by April 30, 2010 and there is no contingencies other than inspections, appraisals, title etc. If every issue essential to replacement "fee simple" title were required to be resolved before it would be thought about a "binding contract, the offer to buy would have to have been tentatively agreed upon by April 1, 2010 or before. I don't believe that was the intent of the legislation.

Since this issue will be a "grey" area for all contracts that are signed in the middle of now and April 30, 2010, it is inherent that Irs may soon issue some type of clarification. Assuming Irs does not, if I were a Realtor representing a Buyer that may be eligible for the tax credit I would make sure that all parties have agreed in writing to the basic offer to buy by 4/30/10 and I would make sure that the Buyer understands that Irs will be the final authority to rule eligibility. There probably won't be any confirmation from Irs until the Buyer has the tax credit money deposited into his/her account.

Realtors are encouraged to have their Managing Broker help rule if the Realtor's "fiduciary responsibility" to be Buyer has been met on this issue.

Here is a link to the Irs Website explaining the Tax Credit.

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

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