Expert: Lori Frankfort - 9/1/2009

Question
Our Son has been trying to buy his first home for months and was not having any luck even being pre-qualified so my wife and I purchased a home he wanted for cash and want to turn around and sell it to him so he can get the first time home buyer 8K from the Feds. Someone told my wife that we had to hold the house for 3 months before he can buy it?. Thanks in advance for your efforts. Tom & Brenda

Answer
I'm not aware of any 3-month holding rule before selling, however, how is he going to pay you for the house?  If he isn't securing a mortgage in his own name and paying market value for the property then he won't qualify for the credit.  If you're just putting his name on title that's not a purchase - he would need to qualify for a loan.  I'm sure there have been safeguards put in place to prevent transfer between family members, as this would not be an arm's length transaction.  If the property is sold for less than market value it can later be construed by the IRS as a gift, and therefore taxable and not subject to a tax credit for new homebuyers.

For more clarification you should consult a loan broker or escrow officer.  Also, to clarify the requirements for the 8k: 1) You must close escrow before December 1, 2009; 2) The credit is 10% of the purchase price, UP TO $8,000.

Best,
Lori Frankfort