Short Sales and the Homebuyer Tax Credit

If you’re looking at taking advantage of the homebuyer tax credit expiring on April 30, a short sale may not be the best way to go.

In theory, you need only have a contract accepted by the seller contingent upon bank approval on or before April 30 to be eligible for the credit, assuming that the transaction is able to close on or before June 30. (Check with your accountant or tax advisor as this is my interpretation and doesn’t hold any weight in the real world.)

Figuring your lender is going to need at least 30 days in most cases to process your loan, that means you need lender approval of the short sale by the end of May … that’s only about six weeks away, which seems to be at the very quick end of the short sale timeline these days.

And that’s assuming that my interpretation is correct. While there’s no question that a contract signed by both buyer and seller constitutes a binding contract, albeit one with a contingency in this case, there’s no guarantee that the IRS will share my level of wisdom. As with most things tax related, the IRS likely will believe you unless they don’t and it’s when they don’t that it hurts.

About Jonathan

Jonathan Dalton is a 30-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.