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First Time Home Buyer Scam?

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CSJ1231

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I wanted to take advantage of the $8,000 First Time Homebuyer tax credit available this year, but didn't have any money for a down payment. I read online that if you use a government agency for financing, they are now letting you use the tax credit for an FHA down payment. I contacted a lender from OHFA's website and was told that they (and the builder they work with) could put me in a brand new home with only $500 earnest money out of my pocket. I signed a contract on a house and they sent me to a tax person to file an amended tax return. Keep in mind that I only have a contract and have not closed. The tax person completed the amended tax return and mailed it off. Later, I thought about all of this and realized it was too good to be true. I've done a lot of research and everything says that you can't file for the tax credit until after closing; yet, they are telling me that it should be back in eight weeks in time to use at my down payment at closing. When I questioned them about this, they said that what they are doing is "perfectly legal" and that they "do it all the time." I am deathly afraid that I will give my current landlord notice, be set to move and then I won't get the $8,000 check to use as my down payment and I'll have no where to go. Any idea what I can do in this situation to give myself some peace of mind?
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July 09 - Cincinnati
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CSJ1231

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My realtor spoke with someone from the IRS who told her that an executed sales contract or closing was necessary in order to file the amended return, which is interesteing becasue "fully executed contract" is the same terminology the lender used when she was trying to ease my fears that we done nothing wrong. Now, I'm trying to find out what the definition of fully executed contract is. Any ideas?
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July 10
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sunnyview

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Bring your stack of papers to the IRS. You can get an attorney, but the IRS will be just as interested in unwinding this as they will at this point. Do it now while you still have time to make good decisions. If you need an attorney, you can get one, but I would start with the IRS. Get as much in writing from all parties as you can and make sure to ask the IRS for a whistleblower reward upfront. Here is the form to fill out. If they collect fines, penalties or taxes from any of these people you could stand to gain something for your suffering while the IRS makes the fraudulent people suffer on your behalf. Please call them.
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July 10
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Andrew Adams, "203K Specialist"

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Go straight to the IRS do not pass GO!
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July 10
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Clay Branch, "Georgia Loans"

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I am not a lawyer but I can tell you if I was in this situation, I would find a bulldog Real Estate Attorney to discuss the situation with and get a professional opinion on how to unwind this.
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July 10
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Carl Henker, "Carl Henker"

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The latest Kiplinger Letter indicates that the IRS in now requesting a copy of the HUD-1 closing statement to verify the applicants took title due to the high number of fraudulent applications.
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July 10
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CSJ1231

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Clay - Yes, that is true. I felt very rushed into this whole thing (the H&R Block lady told me that the deadline for filing was the following Tuesday after I signed the contract) and after thinking about it, I decided the original house was too small and canceled the contract (after the amended return was filed). The builder said they understood and would find me a bigger house. I now have a second contract. I was told that the incorrect address on the form would not be a problem because all the IRS would verify is that I purchased a new home in 2009. After all of the advice and research I have gotten, I am convinced that I was mislead and there is no way I should go through with this purchase. Should I tell the builder this and ask for my money back or should I go straight to the IRS?
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July 10
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sunnyview

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Call or visit your local IRS office here. Tell them that you want to apply for a whistleblower informant award more info here and see if you could be eligible for a reward for providing cooperation for reporting this type of fraud. That will protect you from prosecution and might lead to a reward. You have to deal with this. You realtor cannot help you, H&R Block cannot help you and the builder cannot help you. Tell them nothing and call the IRS today. I do not want to see you close on this house only to lose it later to taxes and penalties. Please call.
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July 10
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Andrew Adams, "203K Specialist"

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CSJ,I think your builder and broker are being way too agressive.Look Up IRS FORM 5405PART IA. AddressB. Date AquiredLine B Enter the date you aquired the home.  This is the date you purchased it (or the date you first occupied it if you constructed your main home)I am by no means a tax expert but aquired..purchased..first occupied...all are past tense and you have not aquired that home and you certainly have not begun to occupy that property.Personally I think this will end badly for you!
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July 10
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Clay Branch, "Georgia Loans"

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CSJ1231, you forgot to also mention the contract on the address you filed the tax credit for fell through and you now have a contract on a different address with the same builder. Is that correct?
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Clay Branch, "Georgia Loans"

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The most recent data on " Pending Home Sales " showed an increase of .1, that is point 1. If the tax credit was able to be used for the down payment that # would have been up 10.1, and a HUGE difference. Contact the IRS and ask them if you can receive the tax credit based on a contract and a property that has not been closed on, they will say no. What would happen if you have a falling out with the builder before closing and never close? Would you try to send the money back to the IRS? BTW, are you paying a higher than normal interest rate and/or fees to the Broker?  
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July 10
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CSJ1231

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Thanks for all of your advice. Here is some more information: Although the lender, Housing Financial Group (HFG), told me that my loan isn't exclusive to Potterhill Homes, they do 99% of their business with them and they worked hand-in-hand on this deal. Although I sent my question about what they are doing to the Potterhill (builder) rep, she forwarded it to the HFG (lender) rep, who is the person that provided the answer I provided in my previous post. HFG is a broker, so another lender would assume the loan at closing, but they prepared the Good Faith Estimate and I provided them with all of my income documentation. They are well aware of where my down payment is coming from. I got my realtor involved yesterday, and she is doing some research for me. The house is located in Cincinnati, OH and the purchase price is $206K with an FHA loan.
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July 10
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sunnyview

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I believe that the builder is wrong. You cannot use the credit as your down payment in that way as far as I know. You can as someone else mentioned change your withholding and use that as long as you have down payment money from another source.How much is the house you are buying? What type of loan? Is it FHA?

I do not want you to get into trouble. Clay Branch is very sharp on the lender side. If says that it can't be done or is shady, I would trust that. Please keep all written documentation letters like the one your posted, lists of phone call contacts, answering machine/voice mail messages etc. I know it may sound silly, but that is what will help protect you from problems if the IRS has issues later.
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July 10
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Clay Branch, "Georgia Loans"

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csj1231, after reading your post initially I thought you were floating a trial balloon to see if this could be attempted but since you named the perps I believe you are actually involved in it. Your last post says  " Here is the answer provided by my lender " but the statement is written by the builder. Does the builder, Potterhill Homes, have a division which is the lender? What is the name of the lender on your Good Faith Estimate and other docs? Your " lender " requires that you show sourced and seasoned funds for the 3.5% down payment and I have NO LENDERS, out of about 40, that would accept the funds coming from the $8K tax credit as the source for down payment. One thing that does not add up is the 8 week waiting period for the money, it can be done as a rapid refund for a fee not to exceed $150 so why wait? I like how the builder shifts all of the responsibility onto the H & R Block rep to try to cover their ... This is simply fraud and if I were you I would get an Atty now.   
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July 10
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CSJ1231

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Here is the answer provided by my lender when I questioned them about the amended tax return based on a pending sale:

"The $8k tax credit is 100% designed for first-time homebuyers for anyone buying a home between January 1, 2009- November 30, 2009.  The tax credit is meant to cover a borrower's down payment and/or their closing costs.  I think where the confusion might be coming from is the wording that the IRS is using.  This credit can ONLY be used by someone that has an executed real estate contract, that of which you have with Potterhill Homes.  The credit cannot be used if someone just "plans" to buy a home.  The credit must be property specific.   Believe me when I say this, you aren't doing anything wrong.  My company has used this credit for customers since the middle of last year.  It's a wonderful program!!  As long as you have the executed contract that is property specific (specific address) you will be ok.  Right now I can tell you that this tax credit is huge!!  I have several borrower's waiting for their credit to come in from the IRS.  Some of these borrowers are in the middle of having their home built and some already have contracts on existing property, such as your case.  Carol Forwith is an H & R Block employee that has helped us with several of these amended returns.  I do trust in her ability to do the best job that she can, and I trust that she won't /hasn't steered  us wrong in misleading any customers."
 
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July 10
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There was an attempt by congress to allow for the credit to be used for a down payment but they decided against it,  could you imagine what new forms would have to be created at settlement, if there isn't enough papers to sign already.  The builder and tax preparer are commiting fraud.

What you can do if  you are eligible for all or part of the credit you can modify your tax withholding (through your  employer), by increasing  your exemptions this adjustment  would decrease your witholding amount  and increase your take‐home pay.
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July 09
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Michael Emery, "MikeEmery"

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To report tax fraud, contact the IRS using the link below. You can be anonymous if you want.

http://www.irs.gov/individuals/article/0,,id=106778,00.html
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July 09
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sunnyview

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Please keep all papers and do what you can to make a paper trail, email trail, contact log with notes about what was said and by who. Do it today before you forget. You may indeed get the $8000 credit back, but you may need detailed documentation for the IRS if it comes asking questions later so get it collected now to protect yourself. You can also visit a local IRS office in person and explain the situation without giving them your name or details. I have found that although it sounds very intimidating that the counter help at the IRS offices nationwide are VERY nice and knowledgeable. They can give you a 100% correct answer and if it is turns out to be wrong later, you will have the date and time of your visit along with the IRS persons name to prove you did what you could to remedy the situation. That make a big difference if it turns out later to be shady. It means you did your best and that you were the victim and not the perpetrator. Don't worry. You can fix this. Get the info your need so you can enjoy your new house or at least not get into trouble over it. You have done nothing wrong, but please document everything and get the answers you need now.
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July 09
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CSJ12,
i recently read online that a couple was arrest for this very same "system" beware; you may close and start enjoing your home but if they are doing this on all transactions, i am sure IRS, HUD and FBI will find them; hud has records of all transaction in that builders project. Could  be few years down the road, if you close escrow save all your documents. there are other options available if you have a realitve either lend you the funds or gift you the funds as outline in the FHA handbook.
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July 09
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Bud Smoker, "Bud Smoker"

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I wouldn't be worried about a place to live, chances are the IRS will help you find a nice 10x8 with 3 squares at a nearby minimum security prison.

I also wouldnt be suprised if that company put their bank info on the IRS request and plans on pocketing it and then closing up shop once they generate enough complaints from ripping off people such as yourself. 

Did your realtor or lender refer you to this company? I'll bet they are getting a piece of the action as well.
 
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July 09
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Carl Henker, "Carl Henker"

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Sounds like you could loose more than the $8000 committing fraud with the IRS carries fines and jail time.  You may want to contact a tax attorney or the IRS regarding this.  In order to obtain the refund a date you acquired the property is needed on the form.  If you have not taken title what date did you use?

Additionally the tax credit can not be used for the 3.5% down payment only for closing cost or additional down payment over your 3.5% under FHA guidelines. 

Good Luck 
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July 09
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Clay Branch, "Georgia Loans"

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You are correct to be concerned. Name the city, builder, and the tax preparer. 
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July 09
 

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