In Uncategorized on 08/22/2012 at 17:27

Just Not a First-Time Homebuyer Home

One more of the 2008 First Time Homebuyer Tax Credit “not for nuthin’”s, David Merritt Funk, T. C. Sum. Op. 2012-82, filed 8/22/12.

Dave and Amber J. Reeves enter into an Iowa land contract in 2007 to buy a home, move in and start paying taxes, but don’t get a deed until 2008.

I don’t see land contracts here in the East, but they’re common, I am told, out in the Great Wide-Open. Seller agrees to deed real estate to purchaser if purchaser makes all installment payments of purchase price and interest, pays all taxes and insurance when due, and makes all repairs. If you read the land contract, most of which is printed in Judge Chiechi’s decision, it looks like a purchase money mortgage, bar the warranty of title.

Dave argues he didn’t own the home until he got the deed, in 2008, when he got a conventional mortgage, paid off the seller, and got the deed. Dave alone claimed the FTHBC-1.

Of course, the FTHBC-1 fails, as the purchase took place too soon, in 2007, rather than in 2008. While the seller had legal title until 2008, Dave had equitable title under Iowa law in 2007, was in possession and treated the home as his principal residence, and had the benefits and burdens of ownership. And Dave deducted his mortgage interest and real estate taxes on the home for calendar 2007. So Dave was a first time homebuyer before the magic date for the credit.

I’m glad that both iterations of the FTHBC are gone. They did little or nothing to alleviate the housing crisis, and were invitations to game the system.

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