Q: I have a property that I purchased in 2008 using the first-time homebuyer credit that must be repaid in $500 increments over a 15-year period.
I now have a job offer in California and am considering relocation. A friend of mine is interested in buying my home; however, if I sell and make a profit, I will be required to pay the remaining balance of the first-time homebuyer credit, which is now $6,500 in full. I do not mind taking a loss on the house and selling it for exactly what is owed at this point.
According to the IRS website, the exception is as follows: “If you sell your main home to an unrelated person or entity, you repay the credit only up to the amount of gain, if any, on the sale. Note: When calculating gain or loss on your main home if you received the credit, you reduce your basis by any remaining amount of the credit. See Publication 551, Basis of Assets, for more information.”
With that said, if I sell my home at the current amount owed, will I have to continue to pay anything back? Also, how can I sell the home, without going through a broker or agent since I already have my buyer and the set price?
A: Your second question is easy. You don’t need a real estate agent or broker since you have a buyer and have agreed on the price.
Find an attorney in your area who handles real estate transactions. That lawyer can draft the sales contract, provide guidance as to how to move forward with the sale, and in many parts of the country can actually conduct the settlement/closing. Although the attorney cannot represent both buyer and seller, there is nothing wrong with your buyer sharing the costs of the attorney. But the buyer must fully understand that the lawyer is not representing him, and that the buyer might want to consider getting his own lawyer.
The first question is really an accounting issue. If you made no profit, you have no obligation to repay the homebuyer credit. But you have to determine your basis for tax purposes. I can’t assist you on this; you really should contact an accountant to assist you in doing the numbers.