Q: Let me start by thanking you for the education you give the public in matters that can be at times so complicated.

My son put in an offer to buy a short sale townhouse in the Orlando area. The offer was accepted and by the seller. The agent says that it was before the April 30th deadline for the $8,000 first-time home buyer tax credit. A form was signed by the seller agreeing to the sale.

My son has yet to go to closing. Does he have a binding contract that would stand up to the IRS rules?

The second lender is holding things up and has not yet formally accepted the offer. My son’s mortgage company is trying to hurry matters along. Will he qualify?

A: To qualify for the $8,000 first-time home buyer tax credit, your son needed to put forth a contract and have the seller accept it. It sounds as though that has happened.

The term the IRS uses is a binding contract and if your son and the seller signed a contract, he should qualify even if the seller needed the approval for the short sale from his first and second lenders.

So far, so good. But you still have to get the bank’s approval (and second lender’s approval) of the short sale and you have to close on the property by June 30. If your son can’t close by June 30, unless he is a member of the military who has served overseas recently, he will lose the $8,000 first-time home buyer tax credit.

Unfortunately, many banks don’t want to acknowledge that the second mortgages they’re carrying on properties are worthless. Even with the government stepping in and paying thousands of dollars to the second lenders, they’re reticent to agree to these short sales.

So, what they’re doing is holding up the property, even though they know the second mortgages are worthless. If they acknowledge the loans as being worthless, it will require them to write off the amount. And, that’s where lenders, big banks and investors have gotten into trouble.

I don’t know what your son can do to ensure that he closes on the property by June 30. It is entirely within the second lender’s purview to take up to 6 months to “consider” the short sale, and then deny the request. But to qualify, he must close on the sale and have a closing statement (HUD-1) in his hands no later than June 30, 2010. The closing statement is the document that outlines all of the costs and credits from a purchase and sale from the closing or settlement agent.