$15000 For Homebuyers From Federal Government Coming Soon?
If you are looking to buy a home, or selling a home for that matter, there is a great deal of talk this week over a $15,000 homebuyers tax credit.
Senator Johnny Isakson, who was a real estate broker in Georgia before he left for government, added a $15,000 tax credit amendment to the 800–900 billion dollar stimulus plan. The goal is to stimulate the housing market.
But what scares the heck out of me is that we have put another roadblock in the home-buying process. If I was closing on a house this week I would do everything in my power to postpone that closing.
Seriously, would you walk away from the $15,000 just to close a house this week? The seller will not be happy and if the market was favoring them I am sure they would raise holy heck. But the reality is that buyers are in control and to postpone a closing until you know the rules on this government tax credit it is crazy to move forward.
Of course, this government intervention may have some unintended consequences for the real estate industry.
For the next few weeks until we know the rules of this housing stimulus we essentially have another reason to shut down the housing market, which in turn will allow the media to come out with horrific numbers to scare people in the future.
So if you are in the real estate industry, be ready for a wild ride the next couple of weeks.
To learn more on the $15,000 Housing Tax Credit, click here. Remember that the bill has not passed so that all of the parts of this tax credit are subject to change until the bill is signed into law.
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Comment by Arn Cenedella on 8 February 2009:
Tom
I enjoy your posts – good timely information and I like your perspective. I am happy to see your cautionary note that the bill is not yet LAW. Given all the twists and turns we have seen in our economy and in Wash DC the past 6 months, I would be careful to assume any result. Will there be income limits on this credit? In my market, the SF Bay Area – that will be a big issue given our average housing prices. I would also be careful about giving buyers the impression they can unilatterally extend close. Generally there is nothing in a contact that gives the buyer that right. An extension can be negotiated but is not guarranteed. Maybe the seller is in an echange, maybe the seller has his moving trucks lined up, maybe the seller needs to close on another house in a stronger market. I would agree in most circumstances an extension can be worked out by giving the seller financial concessions from same. And so buyers need to understand 1) nothing has been finalized and 2) your contractual obligations can not be changed without seller approval. This may be a small but I believe important distinction to meet.
Comment by Tom Royce on 8 February 2009:
Art,
You are correct on a legal standpoint, absolutely. But I think that with buyers so scarce and the amount big enough, they will want to leverage the opportunity. Sure the seller can force the issue, but most will be hesitant to drive away any serious buyer in this market. My bet is most would readily agree to an extension with or without a concession.
Great point!
Comment by Kevin Schmidtchen on 9 February 2009:
Who knows what the buyers would do in this situation. Everyone has a different scenario. This potential $15K credit to me goes along the lines of timing the market which no one can do. I agree that there will be some interesting extensions here in the coming weeks but this will be along the train of thought of timing the market.
Comment by Jason on 9 February 2009:
Tom, Love the blog. I don’t necessarily agree with your stance that the $15,000 would postpone people closing on a home. Whether or not it passes I believe that currently there is a $7,500 credit already written in. Feel free to correct me if I am wrong as I am not an accountant or tax adviser. Secondly, if it does pass it would be retroactive at least to the first of the year. SO, if someone is already planning on buying, unless the difference will make or break the transaction, meaning they are relying on the other $7,500 to offset what they would have spent over the year on the mortgage or as a tax write off, I would assume that the sales would typically go through. I personally think you will see alot more inquiries as this information gets out and a realtors job- stimulus or not, is to help these people find the home they are interested in, or on the other side, make a home for sale as attractive as possible so the buyer can’t say no.
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Aside from the tax credit- the bigger issue will be, who is left to buy a home? Many Americans are completely upside down in their home, and if not, either have other debts, lost a job, or have no way of coming up with the now 20% down that lenders are requiring these days. This tax credit does not look like it will help those Americans who really need it. Hopefully there are other provisions in the stimulus package that will keep homeowners in their houses, and not force them to sell at a loss to someone who can take advantage of this tax credit.
Comment by Tom Royce on 9 February 2009:
Jason
Great points. The only thing I see is that the $7,500 tax credit is a 15 year no interest loan, while the $15,000 is a full tax credit.
Otherwise, my biggest concern is that this has to pass the Senate and make it through the conference committee. Congress has the ability to change things during this process. While the bill may not create a huge change in a high dollar city, this is a 10% rebate for a 150,000 home. That is huge for large parts of the country and worth waiting for.
Since most of the country is not upside down and just waiting for a market to stabilize it it makes sense to wait till the stimulus is passed and there is law to work off of.
That is where I came up with my rational.
Comment by Mike Giraldi on 9 February 2009:
This is very true. I have buyers that are closing on Wednesday. They have already informed me if this bill doesn’t pass they would like to postpone their closing until it does. This is opening up another can of worms and Congress needs to stop screwing around and get this deal done!