We are in the process of buying a house - we’ve signed a purchase contract and are due to close in a couple of weeks. Both of us work, and in particular my husband worked a LOT of overtime last year, so we went over the income limits for the tax credit (I know, I know, a good problem to have!) – Now I see that as of today the income limits have been raised so that we would now fall within the limits to get the tax credit.
Does “purchased” mean “contract signed” (in which case we’re screwed, we’ve already done that part) or “date escrow closes” (which is in the future, so we’re okay)?
Date escrow closes. Purchase is an atomic transaction. Your money and the house ownership swap in one action. The transaction can’t be undone at that point. There is no other useful definition.
Before then you have no right or responsibility to the house, and the money is still under escrow control. Not the owners. You could back out, or the current owner back out (even if it involved penalties, or being sued for damages, the transfer of ownership didn’t happen.) And during this time the house provides the benefit to, and responsibity falls to, the current owner.
It has to be when the deed of sale is signed (which happens at closure). Before that time, you have no right of ownership and after that the former owner doesn’t.
Having bought two houses, yup, it’s the point of escrow closure. Prior to that it’s always possible to back out, albeit potentially with hugely damaging consequences, and and seller still has possession of the house in every practical and legal respect.
It’s an admittedly confusing process because you’ve got so many goddamned things to sign, but the ownership of the house officially transfers when the money goes, at which point you (should) get the keys.
The bottom line for tax purposes is the date that’s printed on your final settlement papers. As I understand it, the new law will require you to submit those settlement papers as evidence of the transaction.
Thanks, everyone! I’m glad to know – and not just because it’s the right answer financially, though of course that’s extremely nice – this buying a house thing is so confusing, it’s nice to have definite answers!