Congress unlikely to reinstate homebuyer tax credit anytime soon

The program that provided an $8,000 federal tax credit to first-time buyers expired April 30. Despite its popularity, several factors may keep it from being reinstated.

Q. I read in the newspaper that home sales across the U.S. have fallen badly since the first-time homebuyer credit expired on April 30. Is there any chance that it might be reinstituted?

A. There's a slight chance that the credit, which offered up to $8,000 to most people who purchased their first home, could be reinstated. But insiders on Capitol Hill tell me that the odds aren't good, at least for now.

It's undisputable that the tax credit, approved about two years ago, spurred sales of both new and older homes to peaks that we haven't seen in more than half a decade. Prices in most parts of the nation stabilized or started rising, too.

So why is Congress unlikely to reinstate the credit this year? Part of the problem is that lawmakers are anxious to begin their long summer break, and many are busy ramping up their re-election campaigns for the November balloting. And even when Congress returns to Washington in mid-September, members will be dealing with lots of other important issues ranging from the war in Afghanistan to curbing the ever-growing federal deficit.

Some legislators also are reluctant to consider reinstating the first-time homebuyers tax credit program because a new government report says that the first one was rife with fraud.

The Internal Revenue Service essentially doled out more than $25 million in fraudulent tax-credit claims under the recently expired program, according to a report issued by the Treasury Department on June 23. About 10,000 of those bogus claims were paid to people who received the credit even though they didn't buy the property that they included on their tax returns: In one instance, 67 people got the tax break by listing the exact same house address.

Another 1,300 prison inmates - including 250 who are serving life sentences - also got the credit even though it was impossible for them to purchase a house while they were behind bars.

And for good measure, the Treasury report says, more than 30 employees of the IRS itself filed for the first-time buyer credit even though they apparently already owned at least one personal residence or rental property.

Q. Who is responsible for paying for the cost of a home inspection, the buyer or the seller?

A. There's no state or federal law that dictates which party must pay for the services rendered by a professional inspector. Instead, it's subject to the give-and-take negotiations involved in virtually any property sale.

Traditionally, buyers have usually agreed to pay for an inspector's services because they're the ones who are most concerned about a home's physical condition. But a growing number of sellers are now offering to pick up the tab, especially if they think it will help lead to a quicker sale in today's slower housing market.

Q. We are trying to sell our home. At one of our open houses, a prospective buyer injured his ankle after tripping on the stairs that lead to our second floor. Now he has sent us a letter stating that he will sue us for damages if we don't agree to pay his nearly $5,000 in medical bills. Are we financially responsible for his injuries, even though there is nothing structurally wrong with either the stairs themselves or the banister?

A. Probably not. Sellers often can be successfully sued if an open-house visitor hurts themselves on an obvious danger, such as a broken window or a "hidden defect," such as a loose piece of flooring that's concealed by a throw rug. But your stairway was easy to see and in good physical shape, so the chances of a judge holding you financially liable for the man's injuries are fairly slim.

A U.S. District Court in Indiana helped to cement this nationwide legal concept in a 2009 decision involving a lawsuit that was similar to the one that your injured visitor is now threatening. The suit, Campbell v. Federal Home Loan Mortgage Corp., was filed by an open-house visitor who opened a door that she mistakenly believed led to a pantry: It instead led to the basement, and she was injured after losing her balance while reaching for a light switch and tumbling down the stairway.

The woman sued the seller and the two agents involved in the visit, arguing that they failed to exercise "reasonable care" by warning her of the staircase. But the court ruled in favor of the seller, saying the staircase was in perfect condition and did not constitute a hidden defect. And even though the light switch wasn't working, the judge who wrote the court's opinion noted that the plaintiff lost her balance while reaching for it: It didn't matter that the stairway was unlit, because she would have fallen even if the switch was working properly.

Call your homeowners insurance company to see what one of its claims representatives thinks about your situation. Also talk to a lawyer if you decide to refuse to pay the man's medical bills and he then follows through with his threat to sue.

• For a copy of the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.

© 2010, Cowles Syndicate Inc.