Friday, June 11, 2010

What Makes A Binding Contract?

Eventhough the first part of the The Home Buyer Tax Credit has expired (it was April 30th) part two requires that the homebuyer closes on the home on or before June 30, 2010.

One of the questions that has come up as part of the tax credit push is what exactly is a ‘binding contract’ in the eyes of the IRS. It is a common real estate term that many don't understand exactly what it is.

As with anything that has to do with tax benefits or legal obligations, it is a good idea to seek the advice of a tax accountant or attorney. They can help translate murky guidelines and offer the best course of action when buying or selling a home.

When it comes to actually writing an offer, allow your realtor to craft the contract or use a standard state contract. Your offer should be thorough and concise, it is vital to not leave any terms blank or undefined. Any ambiguities in an offer can lead to misinterpretation down the line that could render the contact ‘non-binding’. Not only can this have an impact on your Home Buyer Tax Credit, other tax advantages or even the ability to close on the deal.

Be sure to do your research and take advantage of help from real estate professionals and other resources such as the National Association of Home Builders (NAHB) and the National Association of Realtors.

All contracts have some contingencies – and some are more important than others. Just be sure to consult with an expert to make sure your offer is clean, clear and enforceable.