Cash Now or Tax Credit Later

First-time home buyers in 11 states don't have to wait until they file their tax returns next year to reap the benefit of the $8,000 federal tax credit approved by Congress in the American Recovery and Reinvestment Act.The Metro Buyers Group, Alpharetta, Ga., is offering qualified buyers cash at closing in return for assigning the credit to MBG. In effect, the program "monetizes" the credit by turning the post-closing credit into cash at closing, a step the politically powerful National Association of Home Builders was unable to convince Congress to take when it raised the credit from $7,500 and dropped the requirement that it be paid back. Upon signing an IRS form allowing MBG to receive the credit, the buyer will receive a sum equal to their down payment. If there is money left over after MBG receives these credits, that amount less a $125 processing fee is returned to the buyer. Builders and other participants pay a seller's fee of $9.12 per $1,000 of the purchase price — $912 on a $100,000 house — to participate as well as other fees. MBG's Corey Brown believes the Tax Creditor Purchase program, which was created to encourage hesitant purchasers to get off the fence, does not run afoul of the federal ban on seller-assisted down payments because the buyer is selling something of value for cash. The program is currently available in Georgia, Florida, South and North Carolina, Virginia, Tennessee, Alabama, Mississippi, Louisiana, Texas and Arkansas, states where MBG approved tax preparers.