Real Estate Investing

One of my Realtor friends was a little disappointed when he heard Congress was about to extend and expand the $8000 first-time home buyer tax credit because his buyer said, “Well now I can just take my time.”  Ouch for the agent, but for the buyer - I don’t blame him.  He can take some time now - about seven months more to be precise.

According to CNN, the measure that has passed both the Senate and House extends the $8000 tax credit for first-time buyers - or those who haven’t owned a home in the past three years.  In addition, the measure was expanded so that current homeowners can take advantage of a $6500 tax credit if they’ve lived in a home for at least five years.

That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years. The credit would be available only for the purchase of principal residences priced at $800,000 or less.

Given that enticing morsel, NOW is the time for owners who are on the fence to sell.  You may take a loss - or at least not make as much as you would have three years ago - but the $6500 tax credit should take some of that sting away.

As a Realtor, I obviously see many “pros” on this bill.  While I haven’t personally seen the surge in first-time homebuyers for the measure that would’ve ended on November 30th (most of my clients have been sellers), I can see where the expansion will be a huge help.

On the “con” side - takes away from the government coffers in a time when the nation is already facing a lot of debt.  Also, what about buyers who just missed the deadline and bought in 2008?  They still have to pay back the $5000 tax credit they received.  What about buyers who sold their home a year ago?  It takes away their eligibility because they haven’t owned for five straight years.

All in all, though, I’m a supporter of the measure.  I just hope it will have the positive effect on the economy that it’s anticipated having.

Photo from Mortgage Rates & Trends: Mortgage Blog from Total Mortgage.

At college orientation we were told to look to our left, then look to our right.  It was a graphic example of how few people actually graduate once they start their higher education studies.  When I moved into the dorm, perhaps my floor was different than others - or maybe it’s because I did live on campus and we had a longer college life span - but most of my neighbors actually DID finish college.

Why do I talk about this?  Because in today’s economy you can look to your left, then look to your right.  These are the people who today are having financial trouble.  You might even look in the mirror and see yourself experiencing the throes of economic despair.

Former mortgage collector Kyle writes over at Suburban Dollar that there are definitely things you should NOT do when you are behind on your bills:

The crazy thing about it is honest is always the best policy. The debt doesn’t disappear magically so it something that you are going to have to take care of. People have multiple different ways they try to cope with being behind on a bill, most of which aren’t going to do anything but hurt you. The most common ways people deal with being behind are by avoiding it, lying about it, not taking it seriously, being a jerk about it, or allowing it to affect their personal life.

This whole site about managing your suburban dollar is great.   For example, today’s post is about the hidden costs associated with buying a home,

You move in and start to arrange furniture the way you want and get things situated exactly right. Then once the couch is perfectly positioned you go to plug in the cable box only to realize there isn’t a cable, there is no wall plate, and all you have is black box that flickers. This is when the sleeper costs start to really add up.

I have a closing tomorrow with some first-time homebuyers who are just adorable.  I think I’ll give them a link to this very informative, interesting site.

If you want in on the $8000 tax credit for first time home buyers, time is running out for qualified buyers - you can’t have owned a home in the past three years, there’s a $75,000 income limit for singles, $150,000 for couples, and you still have to be able to buy (qualify for home loan with good income, good credit score).  The home must close on or before November 30, 2009.  Over 1.4 million people have taken advantage of the tax credit, according to CNN.com.   While the government has sweetened home buying for some, the deadline is part of what is helping build the success.

Paul Henderson, a Realtor from Lacey, Washington, is ready for the tax credit to end OR to extend it to more than just first time buyers.  He posts on his Active Rain blog site,

All this talk about extending the $8000 tax credit makes my skin crawl. Every time I see this on TV my phone quits ringing. Extending, does take the urgency out of the program which will make the true fence sitters extremely happy. Why make a decision today, when you can wait 6 months?

We’re finding in my own area that the inventory for affordable first time homes is getting low.  I have at least two buyers now looking for houses under $100,000 - there would’ve been about 30 to choose from two months ago, but now we have about ten … and these are the ones that are run down and just a hot mess.  The time urgency is definitely having an impact here.

Meanwhile the National Association of Realtors is lobbying to extend the $8000 credit and not just to FIRST TIME buyers.  They want to see a home credit go to ALL buyers.  However, the tax credit is not a magic bullet. Carla Muss-Jacobs, a broker in Beaverton, Oregon, says the credit can hurt her negotiation position,

How does the $8000 tax credit hurt my deals? First, sellers KNOW about the BUYER credit . . . it’s NOT a secret.  And since the sellers know this, they’re not very willing to: reduce their list price, or offer concessions.  WHY?  Because they know there’s $8,000 on the table from the government, so why cut a deal and give the buyers ANOTHER $5,000 for closing costs, for example?

All interesting, valid points.  What do you think?  Should the program end? Should it be extended?  Expanded?  We’ll know in the next couple of months!