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One weekend left to claim tax credit

By Holden Lewis · Bankrate.com
Tuesday, April 20, 2010
Posted: 1 pm ET

The homebuyer tax credit expires April 30. To qualify, you must have a valid purchase contract, signed by buyer and seller, on or before that date. You have to close by June 30.

If you're a weekend home shopper, the deadline means that you have one more weekend to find a house. If you find a house this Sunday, you will have just five days to negotiate. At this point, buyers and sellers are going to be extra motivated, because if they can't agree by midnight on April 30, all sense of urgency disappears.

A few weeks ago I asked some economists what would happen to house prices in the final weeks before the tax credit's expiration. My prediction: House prices would go up in the last week or two, because sellers would demand a cut of the tax credit. You could call it a procrastination tax. The economists told me that my hypothesis was theoretically sound in a normal real-estate market, but they didn't think there would be much effect on prices in the real world, because sellers are desperate in most markets.

What do you think? If you were selling your home right now, would you hold the line on price, knowing that the buyer will collect a tax credit of up to $6,500 or $8,000? Me, I'd be too wimpy to extort a piece of the tax credit, but my wife is a different story. Just one of the reasons that I like her so much.

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3 Comments
Holden Lewis
April 22, 2010 at 11:27 am

It's illegal to utter false statements on your tax return, but backdating a real estate contract might be hard to detect. Because the tax credit is intended to stimulate home sales, I doubt that the IRS or the local U.S. attorney would make a backdated contract a high priority.

In the Realtors' code of ethics, Article 2 begins: "Realtors shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction." Now, the gist of Article 2 is "thou shalt not lie about the house's mold problem," but it's not a stretch to believe that it would prohibit postdating. Times are tough in the real estate business, so some agents might cut ethical corners.

There's nothing that prohibits the parties from renegotiating the contract. If the buyer and seller sign on April 30, and the parties later decide to drop the price to account for a furnace replacement, that doesn't void the buyer's eligibility for the tax credit.

JB
April 22, 2010 at 11:01 am

What would stop anyone from back dating their contract signing date? Is the contract officially recorded somewhere to verify the date it is signed?

Shnaps
April 20, 2010 at 2:33 pm

Whichever economist you spoke with is spot-on. I think the 'bird in hand' logic prevails these days for sellers. Sellers know if they say 'No' or counteroffer, their buyer is likely to bid on a different house just for the sake of not 'loosing' their tax credit.

This pending tax-credit expiration gives BUYERS the upper hand, big time. As long as the INITIAL contract is signed this week, the buyer can claim the credit. However, the parties can always agree to subsequent amendments, just so long as they CLOSE by 6/30. So for example, when the home inspection comes back, the BUYER can demand all sorts of fixes - like maybe 'replace those beat-up tin sheets with the Cadillac of storm shutters' - and the seller will have little choice but to oblige. Why? Because on 5/1 they know that 'foot traffic' will fall off a cliff.