I am sure in no time the real estate industry will be on the evening news again and not in a good way. Consumers will again have a legitimate gripe from getting bad advice from their real estate professional. Some real estate professionals were giving customers advice on the $8,000.00 first time home buyer tax credit. Some agents were advising their clients that as long as they had a short sale contract signed by both the buyer and seller that this binding contract would be suffice for meeting the eligibility of the tax credit. The last time I checked, I was not a Certified Public Accountant or worked for the Internal Revenue Service. I made the choice to advise my clients to get a CPA opinion or call the IRS to verify for themselves this issue.
One of my clients actually took me up on my advise and called the IRS himself. My client was buying a home on a short sale. The listing agent told my buyer straight up that he would be 100% eligible for this $8,000.00 tax credit because the seller signed the contract. Now we did NOT have bank approval so I heard through very credible sources that the IRS was not considering this a binding contract since the banks who hold the notes for the seller have not agreed yet. Here is the answer my client got from the IRS.
Per IRS- “In the matter of Short Sales, pursuant to the short sale addendum, contracts are considered “not binding” unless
there is bank acceptance on or before April 30, 2010. We suggest that banks involved with short sales have the ability to
make the contract binding prior to acceptance. The bank would need to offer the client documentation in writing stating
the contract is a binding contract but that full acceptance is not yet available and the client would need to open escrow
on the contract”
Bottom-line, Some in our industry gave bad advice to get a short run closing to fatten their pockets. I am very curious to see how this fiasco will play out.
Gary Miljour is a licensed Loan Originator (NMLS ID: 207208) in the State of Arizona.
MyCityLender | NMLS ID: 161428 | ARIZONA MB-0910380 
Gary, not that I’m one to argue with the IRS but they appear to be mis-interpreting the Short Sale Addendum…at least here in AZ. When the seller and buyer both sign the contract it becomes a ratified and binding document. By incorporating the short sale addendum it doesn’t make it “not binding” it just adds a contingency. It could be likened to a financing contingency that a buyer would have. There is indeed a contract but it has outside influences. Just my 2 cents…but I’m no tax advisor.
Shar,
Thanks for your insight. I always value your information since I know you are an agent who knows your way around a contract. I agree the IRS may be doing just that, but I think the point they are trying to make is that the seller’s lien holders are tied to the transaction in interpretation to the tax credit.