| Owner financing helps buyers purchase a home, even | | | | financing arrangement (for example, a contract for |
| when banks say "No" to a mortgage loan. No more | | | | deed, installment land sale contract, or long-term land |
| waiting for perfect credit and a large down payment | | | | contract), and the seller retains legal title to secure the |
| to buy or sell that house. | | | | taxpayer's payment obligations? |
| But will seller financing qualify for the big tax credits | | | | Answer: |
| being offered to home buyers? | | | | If the taxpayer obtains the "benefits and burdens" of |
| Great news! The IRS has specifically answered "YES" | | | | ownership of a residence in a seller financing |
| to seller financing. | | | | arrangement, then the taxpayer can claim the credit |
| It seemed pretty straight forward that owner financed | | | | even though the seller retains legal title. Factors that |
| transactions involving a deed to the buyer and a note | | | | indicate that a taxpayer has the benefits and burdens |
| and mortgage (or deed of trust) back to the seller | | | | of ownership include: |
| would let qualified buyers take the Home Buyer Tax | | | | 1. The right of possession, |
| Credit. However, some wondered if the credit was still | | | | 2. The right to obtain legal title upon full payment of the |
| available when the seller financing involved a contract | | | | purchase price, |
| for deed, installment land sale contract, or long-term | | | | 3. The right to construct improvements, |
| land contract. | | | | 4. The obligation to pay property taxes, |
| One big difference with a contract is that the seller | | | | 5. The risk of loss, |
| stays vested in fee simple or legal title while the buyer | | | | 6. The responsibility to insure the property, and |
| makes the payments. When the buyer has made | | | | 7. The duty to maintain the property. |
| payment in full on the contract then the Warranty | | | | Source: Internal Revenue Service |
| Deed transferring title is recorded. This Warranty Deed | | | | Of course the home buyer must still meet the other |
| is recorded upfront at closing when using a a seller | | | | criteria for taking the $8,000 or $6,500 tax credit. But |
| financed mortgage or deed of trust. | | | | it's good to know there are creative financing solutions |
| Here's the official stand and 7 test points straight from | | | | for taking advantage of the credit by the April 30, 2010 |
| the IRS: | | | | contract deadline and the June 30, 2010 closing |
| Question: Can a taxpayer claim the first-time home | | | | deadline. |
| buyer credit if the purchase is pursuant to a seller | | | | |