Novice Homebuyer Pockets $8K 1st Time Buyer Tax Credit, Uses Funds To Fix House Only To Learn He Purchased Worthless Land Contract From Slick Operator

In Dearborn Heights, Michigan, WXYZ-TV Channel 7 reports:

• The complaints keep coming about Leonard Bale. 7 Action News Investigator Bill Proctor broke the story about the man who has been selling foreclosed homes to families who say they have lost their lifesavings on these deals. Now one city is taking on Bale, who may be facing major fines.



• Leonard Bale will go before a Dearborn Heights board where he already faces $42,000 in fines for failing to maintain rental properties.(1)
But those who say they are victims of Bale continues to grow.


• “We were making our payments on schedule,” says Clayton Waldroup a father of five. He says he had hoped that the Dearborn Heights home he thought he was buying from Leonard Bale on a land contract would be the ideal place for his family for years to come.



• Like so many of Bale’s customers, Waldroup took advantage of the federal first-time home buyers program, and received a substantial check to fix up the house.



• “We moved in. We took the $8,000 we got from the federal government, replaced the furnace. We rewired the home, repaired the plumbing, put new cabinetry in it, refinished the floors, repaired walls, put windows in it,” says Waldroup. “We spent that money, plus all our cash reserves because this was going to be our home.”



• But like these families, and so many others who say they are victims Bale, the Waldroups would find out months after buying and renovating, and putting heart and soul into the place that Bale was no longer the owner. They learned their land contract was no good.



• “There were foreclosure notices,” says Waldroup, which is how he found out his land contract was no good.(2)

For the story, see More families comes forward to accuse Leonard Bale.

(1) See Controversial landlord now facing thousands in fines.

(2) Inasmuch as the so-called tax 'credit' is nothing more than a 15-year, interest free loan, this scam victim may now find himself on the hook for immediate repayment to the IRS of the entire amount of the credit (less any amount he may have already paid back). See Internal Revenue Service Information Release: IR-2008-106, Sept. 16, 2008: Tax Credit to Aid First-Time Homebuyers; Must Be Repaid Over 15 Years:

• The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.

***

• However, some exceptions apply to the repayment rule. They include: [...]
  
  If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. [...] If you sell your home, all remaining annual installments become due on the return for the year of sale.