The Foreclosure Prevention Act of 2008 has been passed by both the House and the Senate. Congress is now resolving differences in amendments passed. Once this process is complete, the bill will go to the President to be signed into law. However, the President's senior advisors are recommending a veto if it reaches his desk. So, this may never come to fruition, but it poses an interesting situation for appraisers.
Appraisers are supposed to report any and all concessions in a purchase transaction. The bill includes a $7,000 tax credit for buyers of foreclosed properties. Whether this tax credit will actually help or hurt the market is a totally separate discussion. In this post, I'd like to discuss whether or not this should be considered as a sale concession that should be reported.
This tax credit will only be given to those buyers intending to occupy the property as a principle residence for two years, so we can automatically eliminate the "concession" for investors, but what about the others? Obviously buyers of foreclosures aren't getting this concession at the close of escrow, but they will be receiving $7,000 over the next one or two years, depending on how the buyer(s) file. That $7,000 makes foreclosures more affordable compared to other listings.
So, how should appraisers handle this tax credit? Concession or not?
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