Real Estate Blog - How the $8,000 Tax Credit Has NOT Helped My Buyers

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How the $8,000 Tax Credit Has NOT Helped My Buyers

After reading the blog being featured today by Paul Henderson . . . For God's Sake, Let's Move On!

http://activerain.com/blogsview/1242745/for-god-s-sake-let-s-move-on-

I was inspired to write this one. I almost feel as if it's a school report, so here goes:

How Does The $8,000 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?

Second, not all buyers qualify for the $8,000 tax credit. The seller might think there's $8,000 on the table for the buyer come tax time, but there might not be.

Which brings me to . . .

Third, if I tell the seller that my client doesn't qualify for the $8,000 . . . the sellers also know WHY! It's NOT a big secret on: income level caps, and having owned a home in the past three years.

If I tell the seller that my cliient doesn't qualify, it tips our hand in negotiations.

Why don't they qualify? 1) They make too much, or 2) they have owned a home in the past 3-years.

Well, if the buyers don't qualify because they make too much, they . . . MAKE TOO MUCH. We can pretty much kiss any negotiating for a lower price out the window.

If they have owned a home in the past 3-years, and they're still able to buy another, sellers assume that my clients cashed-out, or are buying up . . . again, being able to pay for another home.

Yes, I've assisted buyers this year that HAVE benefitted (or will) from the $8,000 tax credit. In some deals, the seller didn't budge on price AND tossed in the closing costs to the amount of the buyers' loan. The house was priced well to begin with, but the sellers had lowered the home down to a price they would not consider less.

I'm wondering, you mortgage people you -- NEVIN -- if receiving an upfront $8,000 is a better deal then taking $10,000 off list price, on a traditional 30 year fixed, on a $250,000 property?

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Carla Muss-Jacobs, ABR, CEBA, e-PRO, Realtor(r)
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Posted by Carla Muss-Jacobs, ABR, CEBA, e-PRO, Realtor on 09/17/2009 04:30 PM

Comments (122)

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Originally posted at: Carla's Blog / EBA Portland, LLC: How the $8,000 Tax Credit Has NOT Helped My Buyers

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122 Comments on How the $8,000 Tax Credit Has NOT Helped My Buyers

SEP

If only a high income meant a buyer was more qualified! In alot of cases higher income means higher debt.

I am primarily a listing agent, and understand that the buyers don't physically have the money until tax time and the benefit in no way impacts the sale today. I could see the argument if they were able to use the 8K toward closing on the home, but the benefit can't be enjoyed for that purpose.

I'm hoping they extend or modify the credit. What are your thoughts?

Diane

Great post Carla.

I'm sending this to Nevin the Mortgage Maestro right now!

He'll set the record straight!

Carla and Craig - Well here goes, my two cents (.01778 after taxes). Assuming your buyer receives the full $8,000 vs. a $10,000 reduction in sales price. Interesting subject with things to consider if I understand your question correctly:

1) If the seller lowers the price by $10,000, the seller takes the monetary hit vs. Uncle Sam (actually all of us but that is another discussion!)

2) I would take the $8,000 over the $10,000 because I am optimistic that the stock market will turn around and if I invest that 8K wisely I should surpass the $10,000 borrowed at a rate of (let's just say...) 5.25%. After interest deduction your effective rate (what you actually pay after tax benefit-estimated) is probably around 3.94%. I believe I could get a rate of return of 6%-8% average annualized return not including stock splits or dividends and it could grow tax free in an IRA, SEP IRA etc.

3) The $10,000 reduction is not cash in hand and does not provide the additional cash cushion for emergencies unless of course the buyer has ample reserves. However in California the sales price determines the permanent property tax rate (thanks to Proposition 13 which only allows a modest annual tax increase on property taxes as long as you retain the property. I think it's 2% of the payment per year.) so the annual tax savings compounded over the life of the loan would have to be considered vs. what one would expect to gain by investing in stocks, bonds etc. For me personally, cash is king.

4) The $8,000 works to real estate professional's favor industrywide (I am aware that some of you may lose some deals because of this) because if sellers are less willing to drop the home price it helps create home price stability in an already declining market. Assuming of course that buyers are willing to pay that amount and if the appraised value comes in at the sales price. If our government would have left it alone, given the emotional state of US homeowners I am not so certain that seller concessions would have been enough to pull us out of this recession quickly. Some argue that allowing th free market to do it's thing would have been sufficient but this too is another discussion. If the media reports home prices stabilizing the governemt is banking on a herd mentality that will likely follow and could get our economy moving again. I think our recession is about 30% real and 70% perception.

5) In my opinion the buyers qualification for the tax credit is confidential information and none of the sellers business. That being said since I am not a tax advisor I will always assume my buyer won't get it and the reason why doesn't matter. So phooey on the seller.

Seller concessions will help move inventory but in the short term it reduces property value and adds to the gloom and doom. Hence the reason for the $8,000 tax credit - to spur more people to buy homes and to help ease the burden of home sellers to stop the free fall of home values.

As an individual, only caring about myself (like most buyers) I'd take the $8,000. If I were a philanthropist and thought the rest of the world would follow suit I would take the $10,000 reduction to help get the economy back to normal by quickly reducing the inventory and not passing the cost of this tax credit to our children and their children's children and theirs. But I'm not so there lies my answer or should I say opinion. But we all know what they say about opinions....

Hi Diane . . . if they extend, I hope they either raise the income threshold, eliminate the prior home ownership critia . . . not sure they should up the amount to $15,000 though.

THANK YOU Craig . . . I appreciate the "blog pass" to Nevin! He's a good guy, and a great lender!!

OMIGOSH Nevin . . . "So phooey on the seller" that's about the best thing I've read all week. You're right about them not needing to know the buyer's business, but it's assumed . . . and I appreciate you comments!! Well spoken. Why not "cut 'n paste" your comment and blog . . . (get some more points -- other then the 25!!)

SEP

Hi Carla! You know, I just took an offer to a seller with information that the buyer was going to be receiving the tax credit and we most certainly did use that against them in our negotiations! My first-time sellers were getting nothing back from Uncle Sam and they refused to give the buyers an additional $8K from their pockets! However, I do see Nevin's point of view--this example was not one of those neighborhoods in a free-fall though!

Have a great day...

Definetly is a negative to Buyers around here. Selles are sticking to their prices more since this 'rush' has created a false Seller's market for the last 2 months and until Nov. After that, look for a lull.

I agree with Nevin. I just had that conversation today with a Buyer. I think it is better to get rid of the credit, be able to buy the place for the 15k less like it should've, and not burden me/my kids with the tax debt.

Hi Debe -- Feeling better? Thanks for your comment, and an interesting prespective from the seller's side.

Hey Matt . . . 50% of my clients benefitted, 50% did not. I'll be glad when we are back to the "market driven" home values -- with a DOSE of hindsight. Don't you think Nevin should just BLOG that entire comment?

I have not seen any deals affected in a negative way from the $8,000 tax credit.

Some very interesting points to consider on both sides of this discussion. I think many of Nevin's points make sense. I've not lost deals because of the credit.

The tax credit has been great for my buyers and sellers. For the sellers, it brings additional buyers to the market, effectively lowering the absorption rate and enabling them to sell faster - after all, the seller's objective is to sell, isn't it? It's also been great for the buyers, not only because it gets them off the fence, but because it gives an extra kicker after the closing. It's common in our market for sellers to pay all or nearly all of the buyer's closing costs and there again, seller's aren't balking.

The argument that a seller shouldn't lower their price because a buyer is getting $$ from uncle sam is illogical. However, if you must follow that logic, then the buyer should pay, not based on what the home is worth, but based on what the seller paid for it - so the seller who inherited their home isn't entitled to sell for thousands more than they "paid".

A buyer's finances are none of the seller's business beyond the simple answer of "can they get the loan or not?" Those sellers you speak of should be less greedy and focus more on the simple question of do you want to sell your home or not? You do, good, then this is what it's worth. If you feel you can get a better offer, I welcome you to reject my buyer's offer and try your luck. I'll take my buyer to see the other house down the street - maybe that seller will not be so concerned with what my buyer does or does not get in tax breaks or credits.

I don't really think that the tax credit, or whether a person qualifies for it or not, needs to be in the discussion during negotiations. Sellers better negotiate if they want to sell, and many buyers are being unrealistic about low-balling because of the economy -- many don't realize that the home is usually priced according to the current market already.

I don't think it's the seller's business whether a buyer gets a tax credit or not. Or what they can afford. If they are approved for a loan that covers their offer, then that's all they need to know.

I present CMAs with all my offers for my buyers, and for my sellers I do CMAs too, so we can see what the market says.

I take emotion out of the numbers. I expect that sellers already know they are paying 3% of the closing costs. If they don't, then the listing agent hasn't done their job.

Bottom line: If you have multiple offers as a seller, then you are in control. If you have one offer, then you don't really have much control if you need to sell your house. You can bluff if you want, but how many more offers are coming down the pipe?

An agent in Oregon (acting either a buyer's agent or a dual agent) is not permitted to disclose confidential info on the buyer's motivation or financial ability.

In my view, disclosing anything about a buyer's eligibility for this credit would fall under "taking action that is adverse or detrimental to the client's interest in the transaction". It should be disclosed only upon express permission from the buyer. If the agent is a dual agent, that permission MUST be in writing.

Whether a seller is willing to pay part of buyer's closing costs should be based solely on what's happening in the market generally. Such costs are always merely a function of price (including appraised price) anyway.

Carla, I'm of the opinion that when in negotiations to buy/sell a home, the agent representing the buyers should never disclose anything about the buyer while the listing agent should never disclose anything about the seller. What a negotiator learns about his or her opponent can be effectively used against him or her in negotiations. If I had an agent representing me in buying a home and if he or she disclosed whether or not I qualified for the first-time homebuyer tax credit or any other information about me, I would fire that agent and find another one. Anything I disclose to you to help me find a home should be held in the strictest of confidence.

That being said, on to your question as to whether ‘tis better to receive $8000 from the seller to use towards closing costs or seek a $10,00 reduction in sales price:

'tis better to offer full price and take $8000 from the seller to use towards closing costs.

I'll give a scenario to illustrate:

Let's assume a purchase price of $300,000, the buyers are putting 20% down, and are looking for a 30 year fixed rate mortgage. Let's also assume $5200 for closing costs, prepaids, and escrows for taxes and homeowner's insurance. For the sake of this discussion, let's also assume the home is priced correctly for the market.

If the buyer successfully negotiates a $290,000 purchase price, His mortgage would be $232,000. At 5.0% interest on a 30 year fixed rate mortgage (at no points)m the monthly principal and interest payment will be $1245. The buyer will need to bring the down payment and closing costs to the table. That will be $58,000 down payment, and $5200 in closing costs, for a total of $63,200. Assuming no other debts, the buyer will need $58,200 annual income to qualify.

If the buyer successfully negotiates a seller concession of $8000 with a full price offer, then his mortgage will be $240,000 - just $8000 more than if he negotiated $10,000 reduction in the sales price. But now he has $8000 to use towards closing costs. But wait - he has only $5200 in closing costs. What happens if he doesn't spend the entire $8000? That's right! The seller keeps the difference - in this case, $2800. What doesn't get spent by the buyer, the seller keeps.

What the buyer should do is first apply some of that $8000 towards points to reduce the mortgage interest rate. In this case, we'll apply 1.5 points (1.5% of $240,000 or $3600) to get an interest rate of 4.5%. Now his monthly principal and interest payment will be $1216 - a $29 savings in monthly payment. But there's still $4400 left over to be used towards closing costs. Because the total closing costs is $5200, and because the seller will pay all but $800 of it, the buyer will need only $800 for closing costs. All the buyer needs to bring to the table is the down payment (which is $60,000) and his share of the closing costs ($800) for a total of $60,800 - this is $2400 LESS than if he negotiated a reduction in price. The buyer keeps his $2400 that he didn't have to spend on closing costs.

And, he needs only $57,000 in annual income to qualify - $1200 less than if negotiated a reduced price. In other words, the buyer will have an easier time qualifying for a mortgage with a reduced payment because his debt-to-income ratios will be less. In addition, the buyer has an additional $3600 that he can apply as an income tax reduction because points paid upfront on a mortgage for a purchase of a home is tax deductible. (Disclaimer: I'm not a tax advisor, Be sure to seek the services of a competent tax advisor.)

There are other advantages to negotiating seller concession towards closing costs as opposed to negotiating a reduced price. However, clearly it's in the best interest of BOTH parties if the buyers and sellers focus on negotiating on the seller contributing towards the buyer's closing costs rather than trying to negotiate a reduced sales price.

I tend to agree with some of the later comments to this post; Drick, Aaron, and Jim. We ask for and review buyer qualifications to make sure that the buyer can consummate the transaction, but really focus much more on market value in negotiations. Not that the buyer qualifications can’t enter into the negotiation discussions with a seller, but if they do, it’s just time to refocus them on market value.

Would the seller take $10k less than what the home is worth just because he/she has some savings in the bank; probably not. Then the seller really shouldn’t expect the buyer to pay above market value just because they may be getting a credit from the government after settlement.

In practice, I honestly haven’t seen sellers turning away offers in this market because they knew about the tax credit. Also, we just got a first-time buyer under contract last night. That transaction probably would not be happening if not for the tax credit.

By the way, it’s good to see the differing opinions on this subject; very healthy discussion. I can only hope that our Congress is debating this issue so intelligently.

-Scott

Thank goodness there are LOTS of homes from which to select. I keep my Buyers on MY team. I explain to them possible strategy options. Once I told my Buyers that I called on a house and the Listing agent asked if I could call back because she was trying to buy Rolling Stone tickets. I said, "OK." But, when I called the Buyer and told him what she said he said, "Forget it, move on to another house."

I totally agree. We live in a capitalistic country, thank goodness. No matter what someone tells me I will STILL TRY. If I don't try, I defeat myself. If you don't try you can guarantee 100% refusal. If you DO TRY, you increase your odds automatically by 50%.

I negotiate just for the heck of it. I guess that comes from my earlier sales training. We don't want to "leave money on the table." Even if the deal is really good, I ask for more concessions from the other side. Plus, I am the one to confront the Seller's agent. I take all the heat and thrive in it.

So, don't worry about the other side, that is what a Free Market is all about. You have to weigh that house and neighborhood with option B or C.

Remember, when we were little? Our mother said, "Don't put all your eggs in one basket?"

Never, ever give up. Contact Linda Alexander (916) 640-3131 Sacramento, CA That frog is choking the stork's neck. He is NEVER giving up. His life depends on his effort.

In the market I am in, a seller who wants to sell better love a buyer, any buyer! even First Time Homebuyers!

Carla:

I have a client who wants to sit this tax credit out. He belives, likke you said, the sellers have added a portion if not all of the cedit to the price of the house. He wants to wait till after Dec 1st to see the prices fall more.

I suggested we offer $8,000 less than the current list price. His response was - I planned on offering less no mater what the list price is, so wait for them to fall.

Carla -- Coming from the standpoint of a first-time home buyer, the tax credit was a MAJOR incentive for me to buy. And yes, I qualified...and I got my check this week. :-)

I have seen a big increase in the number of buyers since the tax credit. There are still many homes for sale in Omaha, a lot to choose from. If the sellers do not want to negotiate, the buyers can move on. The buyers situation or whether they qualify for the tax credit is none of their business and does not have to be disclosed to the sellers. The sellers that are holding out for their price may miss out if they are not under contract in a few weeks. They had better start negotiating.

Carla:

I am amazed at the buyers that think that they get the hold $8000 credit when the buyer only gets a portion. If I am thinking of the buyers credit that I am aware of it said that it is up to $8,000 with guide lines etc. Most of the blogs that I read act as if the whole $8,000 is given to the buyer. "NOT"

Hi Carla...I completely agree! MY nightmare has been the short sale situation. Most of my "1st time home buyer" customers are young and cannot spend alot. Most of the homes available in their price range are short sales...and try to get those closed in a timely manner so that the buyer can qualify by Nov. end.!

Great post. I have a few issues with the $8,000 tax credit and also the way the government is handling it. Yes sales have gone up because of it. However, I find with rumors out there that it will be extended or even extended to all buyers, or that the tax credit will get increased to $15,000 I am finding I am battling the perception of some buyers to wait and see what will be done. This is especially true of those not qualifying for the First-Time Homebuyer tax credit. They say they might as well wait and find out if they might be included in the tax credit the next time around. I believe it has hurt and helped sales.

I also see a high likelihood that a lot of the buyers using it will end up going into foreclosure. They get a USDA loan with 100% financing. They get the seller to pay part of the closing costs, then are gifted the rest from their family members. They have absolutely no money, but do qualify to buy the home. One had less than $2,000 in the bank. They will get their $8,000 from the taxpayer, and I believe will likely go into foreclosure as they do not have enough money to pay their mortgage. In many cases I think that many of these will become short sales next year. I hope I am wrong, but the 100% USDA loans I believe are going to get us into the same trouble again, and to add to insult we will be giving them an additional $8,000.

Great points. Although 90% of our business has been First Time Buyers since because of the tax credit and it did not effect anything in the negotiating process.

You bring up very valid points but quite frankly this HAS NEVER came up and not impacted closing costs or other concessions. Whether it continues or not is up for debate (I am not a big fan of bigger deficits).

I have had the tax credit work for my buyers, and havent at all had sellers thinking it is money for THEM to play with during negotiations....

Even if the seller neogtiated the deal factoring that money in, how would they ever prevent the buyer from claiming the credit?

I have seen real urgency in the price range and n'hood that first timers are looking at, especially the last 30 days, due to this tax credit...I only expect it to increase.

I also expect an increase in stress as the time shortens, and buyers are in a rush to close in time to qualify! Everyone will feel this...agents, buyers, lenders, appraisers, underwriters....OUR BUYERS BETTER HAVE A LENDER WHO CAN PERFORM COME OCTOBER/NOVEMBER! the times of buyers "going with their friend in the business" is not NOW! They need a quality lender who can get the job done in a timely manner.

Hi Carla, I deal with all of the points you mention all the time. I work with first time home buyers and I encounter exactly what you described from the sellers. On top of everything else, someone recently told me that anyone who gets the $8K also has to pay taxes on it. Many people are not thinking about that. And most of my people are using the money to pay off debt.

Carla,

I think the Seller needs to look at the fact the the Buyer would probably not even considering their home if it wasn't for the Tax credit. The tax credit is drawing Buyers into the market that a few months ago were willing to wait out the recession. The Seller should not concern themselves with whether or not a Buyer is qualified to receive a tax credit, but how to sell their home at a fair price based on current market values. If the house isn't overpriced, then they should be able to negotiate a sales price within a few percent of the listing price. If the Buyer is not willing to pay a fair price, then they either will never find a home at a price suitable to them or there are other homes that are competing with your Seller's home and are better priced. In the current market, a Seller should be thrilled to receive an offer and should really make their best efforts in negotiating for a successful sale.

I think more Realtors® have an obligation to urge potential homeowners to consult with their accountant or mortgage broker as to what they can afford in a house payment. Many will find that if they need that $8,000 - they really shouldn't be buying in the first place!

IMO, the politicians have got this all wrong. The $8,000 should be spent on keeping homeowners in their existing homes, not in bringing more people into the likelihood of foreclosure. How many homes are for sale in your communities that were purchased less than two years ago? More and more people are realizing that they are not going to profit from building equity in the short run and they are still over extended. With lending guidelines going up to 42% of disposable income, we are not helping anyone out by selling them a home that they can only afford to buy if they get an $8,000 tax credit.

As for the sellers, if they think they can overprice a home to compensate for someone's tax credit, they need to go back to school because USA Today is at a 3rd grader's reading level and Sellers should be at least at an 8th grade level - then they might understand some of the harsh economic realities.

My opinion, in my area, is that this $8,000 tax credit "incentive", has been just that, an incentive!

This has bought first time buyers out in droves, that may have otherwise continued to sit on the fence as sellers still continue to sit on the fence.

What I see here (and Real Estate is local) is sellers are still holding out on their prices no matter what, or simply taking their homes off the market until a better economy appears.

Finding a good, qualified home for these 1st time buyers is a feat in itself, as most "good deals" go to highest and best within a day, leaving the rehabs up for grabs. Almost 90% of the homes sold have been either short sales or foreclosures. The sellers are just not moving unless they absolutely have to, and who can blame them!

I think the RE market would not have moved at all this year if NOT for the tax credit and that at the expiration, if there is one, the market will again start its slippery slope downward.

People need jobs in order to pay for a home, no matter what the incentive is and the few that did not buy during this flurry will always wait it out.

Carla... a good spin on this topic. I just wrote about the tax credit and it's harm yesterday. Please take a look at it, it was also featured. But overall, you bring up some good points.

@ Nevin... I agree with most of what you stated, but I think I found one issue. You stated this... "Seller concessions will help move inventory but in the short term it reduces property value and adds to the gloom and doom. Hence the reason for the $8,000 tax credit - to spur more people to buy homes and to help ease the burden of home sellers to stop the free fall of home values."

Yes or no... don't you think the $8,000 also increases the value of the home? Meaning... it has created more multiple offers, raising the price. If this is the true case, not forgetting that real estate is local, how does seller help reduce property value? Sure, it's part of the equation, but sometimes price is adjusted in the appraisal because of this. I see part of your point, but my main issue is... appraisals are opinions. We have gotten our panties in a bunch on appraisal values, especially because we allowed the market to climb too quickly 6 years ago.... and that was do to several different factors.

The $8,000 tax credit had many uses. But let me throw a curve ball at you. Do you think overall that we need to continue the tax credit? thanks

@ Bob... comment # 27. who told you this? If I told you that I am god, will you believe that? Not trying to insult you, just trying to make a point.

jeff belonger

I just wish this will go away 8k, clunkers for cash, bank bail out, man I have not been able to get anything for me all the govt spending and I am still without my check??

Bob - @ Nevin... I agree with most of what you stated, but I think I found one issue. You stated this... "Seller concessions will help move inventory but in the short term it reduces property value and adds to the gloom and doom. Hence the reason for the $8,000 tax credit - to spur more people to buy homes and to help ease the burden of home sellers to stop the free fall of home values."

Yes or no... don't you think the $8,000 also increases the value of the home? Meaning... it has created more multiple offers, raising the price. NO I think investors paying cash for homes has created multiple offers, at least in the cities in where I do business. I can't speak for other areas. Not saying you are wrong by any means. Your exposure to the areas in which you serve it may have a totally different impact on the market.

If this is the true case, not forgetting that real estate is local, how does seller help reduce property value? By offering seller concessions on a large scale it makes it the norm for that area and the Herd mentality follows suit which in turn makes the concessions "normal" in Real estate negotiations. As a result I believe the prices begin to edge downward.

Sure, it's part of the equation, but sometimes price is adjusted in the appraisal because of this. I see part of your point, but my main issue is... appraisals are opinions. We have gotten our panties in a bunch on appraisal values, especially because we allowed the market to climb too quickly 6 years ago.... and that was do to several different factors. I see what you are saying but the key word you stated is "sometimes" the price is adjusted. When it is it helps forge the opinion of a declining or stable market. Why else would a seller offer concessions in a growing market?

The $8,000 tax credit had many uses. But let me throw a curve ball at you. Do you think overall that we need to continue the tax credit? thanks My personal opinion is NO. Let fail what must fail, swallow the ugly pill, we made our bed let's sleep in it etc..

The reason for most of this mess is lack of trust from the entities (or people, pension funds,money managers) that buy mortgage backed securities MBS. When those folks want to buy MBS and the government steps away from the table only then will we see underwriting guidelines ease which in turn allows more to qualify for loans which brings back buyers who then buy homes which then reduces inventory, creates demand and pushes values higher.

BUT our government doesn't know when to stop buying the securities because they are trying to soften the blow. Out of fairness here's what I think the tax credit has done in a positive way, it has allowed the market to continue moving and as a result "calmed down" the markets. Remember I said that 70% of this mess is perception and the feds know it and are feeding off of it.

It might have restored faith in the purchasers of MBS because the u/w guidelines are so strict that these are arguably the best rated bonds or MBS ever sold in the US. With all that has happened I think the tax credit needs to stop at the end of October as scheduled. Only because the future ramifications for my kids are horrible.

If I live in the now and the next 10 years then what the hell...let it roll for another year or increase it. I guess it depends if you plan for the future or live day to day, check to check. Future planners want it stopped sooner rather than later. Day to day planners say let's the good times roll and keep it up. What I see happening to or economy as a result of printing money to keep thing moving is scary.

I think its naive of the sellers to think that just because the buyers are getting money means they wont negotiate a fair sales price based on the market. buyers are certainly not going to pay more then anyone else because they are getting a tax credit. its funny how emotions work in this biz

Interesting discussion today....

Patricia Aulson/portsmouth nh homes

Carla - Congrats on the featured post! A well deserved honor!

I'm glad Nevin was able to shed some light on this as well.

He is the mortgage guru!

I have not had the $8k be an issue wth either a buyer or seller. I have had more buyers in the market because of it.

It does give us all something to talk about.

I think the goverment should compromise and modify the credit. One way would be to split the credit and give $4,000 to buyer and $4,000 to sellers.

WOW!., I am so glad that someone finally posted a discussion for this matter. I have had so many problems with this tax credit for First Time Homebuyers. Especially since the media down here has confused it with the FHA making a statement to allow this $8,000 to be used towards the closing costs as a bridge loan. Many of my buyers are young and do not have alot to put down, have little to no credit or have parents that feel that their child can buy the home regardless of what the lender says because they are going to pay for the down payment. The tax credit has been so commercialized., but every lender we have worked with here is finding a problem with it because many of those new home buyers are qualifying for FHA loans that require 3.5% down and the buyers are wanting to use that $8,000 as closing costs ( because the media is saying they can).

My Sellers are not accepting seller concessions because they then have to bring money to the closing and for those in the short sales., it has been particularly difficult to cover those additional requests when they realize the buyer is getting the incentive to buy the home already at a discounted price in addition to receiving a purchase benefit from the government at the same time.

Thank you for the great post. It is good to see others opnions on the matter.

I have heard several sellers agents talking about this and how the sellers are counting the "savings" that the buyers are potentially getting and I wondered if it was changing the structure of some contracts.

Carla: At the end of the day it is a matter of what works between the buyer and seller. If a person does not qualify … then they don’t qualify. What does that have to do with price anyway? The tax credit is to the borrower … not the seller. We all know value is determined by buyers. The tax credit is not much different than qualifying with a gift from a parent or someone else.

I did a slightly on topic post a while back about Sellers using the 8k credit knowledge against them. I had a LOT of this earlier in the year. They'd come back in negotiations or repair negotiations with "No, you get free money, we don't, use that to fix the roof."

Now I'm not seeing any of that, but what I am seeing is less negotiations and more sticking to their sale price. For them it's not been because of the credit, per se, but because of the credit driving more buyers out there putting the home into multiple offers and such. So indirectly because of the credit?

For most of my buyers, like Nevin, Cash is king. And most do plan to inject it into the economy - some savings but a majority of it spent on house-items, upgrades, furniture, a new car for one, and a wedding for another!

It has helped me close a couple of purchases. The buyer was wavering do to unexpected cost, but saw the Credit as a way to offset those cost.

Take away the tax rebate, the horse trading. Buyer wants to buy and can only do if....or will only if....... Seller wants to sell and will if this..... or this...... Timing is the key, and a compromise is where neither party is happen but the place gets sold. If the seller owes more than the buyer is willing to pay or the bank appraiser will allow, it's either pay to close from the seller's pocket, work a short sale and pretty cut and dry on options. Whether the buyer is getting a rebate, getting another $5000 contribution from buyer is not a case of fair or too far one way. It's a case of what the buyer will do to purchase the place, how far a seller will go to make it happen.

I like Linda Alexanders comment. Well put. The tax credit has definitely stirred up business. But like the rest of the agents, I ask . . what next?

since when does how much money you make determine what a home is worth?

Well, I was not in favor of the tax credit to begin with. Nor was I in favor of any of the bail-outs, or the cash for clunkers program, so my point of view is different. I'm glad if it helped you close more sales this summer, but the long-term effects on our economy are scary. I hope they don't extend it.

But back to how it affects sales right now:

I can certainly see how sellers would say "Nobody is giving me any gifts. Why should I give more on top of what my taxes are giving these buyers?" And while the buyer's finances are none of the seller's business, that doesn't stop them from thinking and even assuming.

By the way, buyers CAN use the $8,000 at closing. They can even use it for part of the down payment in some cases. It all depends on the kind of loan.

Check out the mortgage articles at bankrate.com, then talk to your most knowledgeable mortgage broker about this!

I'm seeing a lot of first time home buyers that qualify for the tax credit really target short sales, reos, and others in need of a sale. It isn't hurting them at all.

I have had the 8K complicate some deals this year - the buyer's requests for seller concessions (almost 100% of offers these days) generated anger from the sellers (many who were selling at a break-even situation due to declining values) over the perceived greediness. I've represented both sides in this scenario.

I haven't had any deals complicated by the credit myself, although I also didn't have very many extra deals as a result of it.

Any seller is always trying to get as much as he can for his property. If he gets an offer, he has a decision to make. If he decides that his house is worth more because of a buyer's possible tax credit, then he takes a chance on losing his deal. It's a business decision and a negotiation point. In my opinion it would be foolish for a seller to take a position -- any position -- on that tax credit.

And BTW, I am all in favor of that tax credit and believe it should be extended and even expanded to all buyers. We have got to reduce the inventory.

Akron, OH

there has been some confusion about the tax credit, my client is telling me that he is being told that you don't get $8K you only get 10% of the sales price...

Two posters above made comments that are based on misinformation.

(1) The buyer DOES get the whole $8000.

The seller doesn't share in it. I'm not sure how anyone would think they did, but hey, taxes are confusing.

(2) The buyer DOES NOT have to declare this credit as income on their next tax return.

It is a tax credit not a tax refund.

The $8000 is a refundable tax credit. But it is not a refund.

Low income taxpayers (married under about $30,000 - for simplicitiy's sake) receive an Earned Income Tax Credit. Same thing: refundable, not taxable next time.

I'm very busy this weekend -- so forgive me for not responding to each comment. They are all very informative.

For the record . . . I DO NOT / HAVE NOT / WILL NOT use anything that is privileged, or not in my clients' best interest as "negotiating" methods. I have not discussed my clients' financial with anyone. This is why I wrote my blog post. I have seen the $8,000 NOT A SECRET tax credit be used by LISTING AGENTS in THEIR negotiation of the offer MY CLIENTS submitted on their offer to purchase.

What I AM experiencing -- which is why I wrote this blog -- is that LISTING AGENTS have said to me, "We aren't going to . . . " (reduce the price, offer concessions) and then followed it up with "because your clients are getting the $8000 tax credit."

I HAVE NOT said anything to a listing agent to the affect that I EITHER CONFIRMED OR DENIED my clients' financials, i.e., if they qualify for the tax credit or not.

I go in with the offer, and the listing agent comes back with the "WHY" they are not accepting it as written.

My clients, quite a few of them . . . DO NOT QUALIFY for the tax credit. Again, I neither confirm or deny this to the listing agent either. But . . . if you read what I wrote, and NOT try to think for me on why I wrote what I wrote -- as if ANYONE could actually get inside my brain and figure it all out -- there is NO SECRET that (some) BUYERS will 'benefit' from the $8,000. As Clint Miller wrote (#18) he ALREADY received his.

It's NOT A SECRET what the QUALIFIERS are: 1) Income limits, 2) previous home ownership. So I can not say "My clients are illegiable . . . do not qualify for . . . " because -- in my market where listing agents ARE using it to negotiate -- it tips our hand.

I don't make up the qualifications. And in my market, I've seen listing agents put up riders on their FOR SALE signs saying "This home qualifies for the $8000 tax credit!"

HUH!?!?

Do the listing agents use this $8,000 to market a home. YUP. I've seen it.

Do the lisitng agents use this $8,000 "NOT A SECRET" to try to STICK the listing price?

YUP!

At least this has been the case with some of my transactions.

And Jim Hale, I don't need a primer on how to conduct my business, thank you very much. I'm a big girl now and actually do know how to represent clients. If your comment #12 was directed at me, I wonder where you got ANY notions that I needed a PRIMER in agency relationships?

Carla; although I understand the point you are making from the seller's perspective I think it is important to educate the seller on the condition of the current market. Typically the average homeowner trying to sell their property in the current market is in competition with a multitude of bank owned properties which attract the first time home buyer due to 'bargain basement' prices. If the seller is in receipt of multiple offers they are certainly in a position to consider all factors and accept the most beneficial to them. However, if the seller does not have this option and a buyer eligible for the tax credit presents an offer the seller needs to realize the credit is the buyer's incentive to jump into a downward spiraling market and the seller's opportunity to move on if that is their desired outcome. Of course if this is not a market condition of the location of the seller and the seller is in a position to wait for a better offer none of this applies. I also agree with several responses especially the one making a point about the buyers ability to pay not being relative to market value and the one pointing out that a tax 'credit' is not only not taxable but not required to be repaid just by definition of the word credit. However, when in doubt check the facts with a CPA rather than belief in heresay.

I simply do not mention the tav credit unless asked. My buyers know if they qualify the day they get pre-approved, we discuss it with them. If they say the home costs to much then I say, yes, but remember you will be getting it back (or you will be getting ost of it back) because of the tax credit. You have to give them all the information. I speciffically ask our in-house mortgage person to cover it. That way there is no confusion. Since I am not the sellers agent I do not feel it is my responsibility to discuss this with them. If asked I reffer them to their agent.

I agree that a clients personal financial position should not be a factor whatsoever in negotiations - we should be maintaining client confidentiality at all times.

A home is worth what a motivated buyer will pay and can afford, and the net sheet should dictate what the seller can and will let it go for. Work it out between the parties or move on.

In my opinion, the tax credit should not have anything to do with negotiating between the seller and buyer. Just negotiate as best as you can for your client. If the $8000 is available to the buyer, good for them. But why does the issue even come up except beween a buyer and their agent in terms of having some money down the road to spend somewhere?

In the Modesto/Stanislaus County market the tax credit does not seem to be an issue due to the lack of inventory. Even though we are in one of the highest foreclosure markets the number of properties that are being released by the banks is minimal. The realtors in this market just want something to sell! As for someone's comment about leaving money on the table when the seller is paying closing costs, this is where the relationship with your local lender comes into play. If you have a strong relationship with your local lender they are going to get as close as they can to spending all the money. One of the problems is when the seller, the Bank, dictates that your client gets prequalified by them and then stays with them because they think it will help the deal. Not the case! No one can dictate who your buyers uses for their loan and yes a second prequal is an inconvenience but the relationship you build with local lender will pay you back tenfold - less hassle, quicker closing and someone that really cares about the relationship between you and your client.

Christine - I would like to break this myth that only a local lender cares about your client and can do speedy business. I originate loans in Oregon, Washington California and North Carolina. I'm fast, the agents and their clients love my service and I really care.

Distance has nothing to do with great service or accountability. There are several agents here on Active Rain that live on the west coast who use my services even though I am here in North Carolina because their local lender won't pick up the phone and even though they live close by they haven't seen their "local lender" in years. I am always available and return calls faster than most. I also take the time to fly out a couple (or more) times a year to my agents location and meet with them. I think long distance mortgage brokers care more than local because they value the trust.

Carla,

I think that a lot of people are ready for the tax credit to go away, especially after some of the blogs that I have read on AR in the last couple of days.

One more thing, Ipractice what I preach. My financial planner is in Sacramento, Insurance agent in Eastern North Carolina, my CPA is also in California and my Real Estate attorney is in Washington. All of them provide me outstanding service.

WOW -- I don't even know how Christine managed to get from my blog to "local lenders" . . . and it's not a 'prequal' I'm after at all . . . I want my clients to have a Preapproval.

There is always going to be two sides to every story and unfortunately for every upside, there is usually a downside. Congrats on the feature.

You have some good points there and there are always many sides to a story. Do the best you can for your buyer or seller and that is all you can do.

Deb

Good post, these are some factors I had not thought of...thank you for bringing to light some other points of view to consider. I like being able to look at an issue from more than one perspective and this is some of the better information I have seen! Thanks!!!

This is so true, I have a few sellers who feel they should raise their price because they buyers may get help. I have to explain that not eeryone will qualify.

Carla, I do see your point of the $8,000 tax credit it and it throwing a wrench in there between some buyers and sellers. But of course it is not the only financing program out there...

Congratulations on the feature. The tax credit has helped my business and we're really seeing an influx during the month of September. It is not the Seller's business whether or not my buyer client is receiving a tax credit. Just as it is not the Seller's business if my buyer client has a tax lien that would impact them receiving a credit (yes, I've sold homes to individuals with tax liens as they were making regularly scheduled on time payments on the lien). As a listing agent, I've seen the tax credit impact my listings be creating a "feeding frenzy" on properly priced properties.

When the competition for the tax credit deadline causes entry level homes to rise in price (temporarily) it doesn't help the buyer... it actually hurts them in the long run. When the credit expires and the urgency returns to normal levels, prices will drop again until the market naturally stabilizes.

I, too, had to tell some of my first time buyers that they did not qualify for the tax credit due to making too much and they were not happy about that. The government seems to have a way of hurting those who excel at business. Not fair!!! I also agree that the negotiating gets trickier...

Quote: Well, if the buyers don't qualify because they make too much, they . . . MAKE TOO MUCH. We can pretty much kiss any negotiating for a lower price out the window.

Why? Doesn't negotiation include what the buyers were willing to pay?

You are an exclusive buyers agent and it hasn't helped your buyers?!?!?!?

How many of your buyers have received the credit?

How many was that the reason they started looking at homes?

Sure it can make negotiating a little more difficult, but isin't it worth it for 8 grand.

The biggest question out there I hear is whether or not the credit will get extended. The 8k really has not come up in negotiating a deal.

SEP

Great counter point Carla. It helped Buyers at first. However, now it seems to be working against them. Higher prices and more competition right now.

The whole point of my blog, and I will repeat it for people who like to "quote" me, and for those who are still attending a wedding . . . (okay, okay, we know you two got married -- isn't AR offering 1080 points for changing photos??) I will REPEAT! EVERYONE KNOWS ABOUT THE $8,000. EVERYONE KNOWS! Sellers know there is $8,000. It has hampered my negotiations . . . NOT my business. I am an EBA, and what does the tax credit benefit my clients -- and I've worked with a lot of them -- WHO DO NOT QUALIFY?? How does "not qualifying" for the benefit help my clients?

And how it HURTS my clients, is when the sellers assume -- and I'm going to REPEAT THIS AGAIN -- EVERYONE KNOWS ABOUT THE $8,000 Tax Credit. It isn't a secret.

I've had listing agents COUNTER our offer, with full price, no concessions stating, "Well, you clients are getting the tax credit."

Hmmmm . . . and Ms. Rice that's why I CAN NOT say "They make too much" . . . but if they DO NOT QUALIFY . . . they DO NOT qualify for one of two reasons: 1) they MAKE TOO MUCH, or 2) they have owned a home in the past 3 years.

So . . . Mr. & Mrs. Bride & Groom "sure it make negotiating a little more difficult, but isin't it worth it for 8 grand."

No. Negotiating with listing agents who want to talk about a tax credit as a way to get their sellers a higher price is NOT FAIR when the buyer DOES NOT QUALIFY. . . not ALL BUYERS QUALIFY. Maybe Genuis Ventures . . . you'd have figuerd that out.

The INTEREST RATE has more to do with my clients buying a house then the tax credit. Many of my clients are high(er) income brackets anyway. They make too much, Ms. Rice, and I'm NOT about to let the seller's agent know that.

So when the listing agent comes back and bumps up your offer by $8,000, or doesn't allow closing costs concessions, or won't lower the price because they are NEGOTIATING the deal USING my clients' $8000 tax credit (presumed or otherwise) would do you do?? Tell the listing agant, "My client doesn't qualify . . . because they make too much??" Is that what you'd do?? If so, how does this promote your clients' best interests?

Exactly . . . it doesn't!

Buyers are getting a little frantic around here trying to meet the deadline. It's really hurting the short sales right now because 1st time homebuyers don't want to get into contract on one because of the timing issues and buyers that are already in contract on short sales are bailing out because they may not close in time.

I agree with others who have said they would not disclose the buyers qualifications for the program to the seller.

Impressive comments, Carla. This really brought out the discussion and obviously from many different markets that are impacted differently. (By the way, I saw a few questioning the $8k amount and am not sure I saw it answered. The tax credit is 10%, but in most markets, it's difficult to find a starter home for less than $80k, so first time buyer's automatically max out.) Congrats on the feature, Carla.

zzzzzzzzzzzzz Why going into this subject when this program is almost over. Get ready for the future

Sarcastic comments in your explanation aside, I still fail to see why you have to say anything about them qualifying or not about the tax credit. "This is unacceptable to my buyers, here is our response" should be answer enough.

This is a very pertinent topic. I appreciate Lewis' comment because truly the disclosure of such information seems unnecessary and counterproductive for your Buyer. But on the other hand, if the information is already disclosed, I disagree that it automatically has to be interpreted that the Seller does not have to give a break on the price. Generally what's in the contract needs to be presented to the Seller in such a way that they understand the Buyer's situation and why those things are written in. If the Buyer needs help with the closing costs, it's up to the Buyer's agent to explain that it's one of the necessities of making the deal go, not just trying to suck the last penny out of the Seller. If they need help with costs or a lower price in order to consider the purchase, that's just the way it is and the Seller must decide accordingly. The tax credit is certainly a benefit to the Buyer, but as Aaron and Lewis mention, not during the purchase.

However, if Buyers take advantage of the possible credit next year before filing their tax returns, my understanding is that they would be able to take almost immediate advantage of the funds, even for the down payment? A good reason to file an extension if you know you're buying in the late spring or summer...

Does anyone know more about that?

I totally agree with those who say that whether buyers qualify for the tax credit should NEVER be a part of the negotiations. In fact, since that's private, personal financial information, disclosure of it by the buyer's agent in fact is a breach of fiduciary duty.

Would a buyer's agent reveal, for instance: "My buyers just inherited a million bucks." Never!

All that should be discussed is the offer. Sellers can assume whatever, but they may ass u me themselves right out of a sale. This tax credit or any other personal financial matter, short of qualifying for a loan, in no way should be discussed or disclosed, therefore would have no bearing on the negotiations.

As an investor who primarily buys homes to rehab for first time home buyers, about the only folks who come through the homes that I own are folks who qualify for the $8K tax credit. Having said that, most of them are cash poor and looking for the 3.5% FHA loan and anywhere up to 6% cash towards closing. Its a buyers market and I know that so I am willing to accomodate the seller if it means that a deal will work as a win-win.

I usually do not work with 1st time buyers but have a listing coming up where I am sure I will encounter some. Thanks to you fellow-educators/agents, I will be more prepared. Thank You!

You should not be disclosing "anything" to the sellers regarding your buyers personal affairs. You write the contract, present it, and negotiate the individual terms. You do not discusstheir finances or whether or not they qualify for the tax credit or any other assistance programs.

We have not seen any such issues with sellers in any of our transactions... we are still negotiating well... and that across 4 agencies in 4 states...

For our buyers the credit has worked well, and as no body knows whether they qualify or not, and as we do not tell them anything in this regard, we negotiate as usual... Perhaps it is more about negotiation skills than about tax credits.

Hi Carla, Congrats on feature post! very good post. Enjoyed reading all the feeback. Well the program is almost over, so I don't think we have too much longer to worry about this, unless it gets an extention. thanks for sharing!

Good points to consider. When making offers on bank owned homes though, I don't believe the banks ever figure out one way or the other if the buyer is eligible for the credit or not. To be honest,as an REO Listing Agent, I don't think they care. What they want is for escrows to close.

I'd no sooner tell a seller that my buyer qualifies for the first-time homebuyer tax credit than I would that my buyer has a slew of children and qualifies for an $8,000 child credit. The buyer's tax situation is no one's business except the buyer's.

The only effect of this tax credit that I have seen is that the buyer may have $8000 down the road to fix up his new home, or spend on whatever they choose. Adn, of course, it got some buyers off the fence.

In the Ventura real estate market , it's been a non- issue thus far. It's really not the seller's business as it has noting to do with their qualifications as borrowers or true market value.

I think this post makes a good point and I agree. It is nice to work with and find very motivated buyers, but many lose their heads about getting this credit. It still matters what you pay for the property! If you bid up $20,000 just to have it in time for the credit are you really saving money?

It is creating more of a false sellers market in my market too. But the biggest factor in the false or stealth seller's market is the lack of inventory which most attribute to the foreclosure moratoriums implemented by the state (in CA) and Feds. I don't think they are helping buyers really take advantage of the interest rates which are a big part of what is so great about buying right now. We dimply don't have enough inventory to meet demand. I don't see prices shooting upward so drastically so interest rate is the biggest variable for the future in my mind. Because of the shortage of inventory, I have to wait in line at every new listing!

Tni LeBlanc
tni@mintprop.com

www.SantaMariaRealEstateBlog.com

When I present the offer, and the listing agent comes back and says "We're COUNTERING because your client is getting the $8000 tax credit . . ." this is when the tax credit DOES NOT HELP my buyers.

Fair Market Values and INTEREST RATES are what really motivates the market --

ALWAYS has, and it ALWAYS will!!

P.S. TRI, I was just writing this comment as you were writing yours. YES -- it's ALL about the interest rates!! Great minds . . . as they say!

It sounds like each of the bloggers are overthinking things. We must remind buyers and sellers of one simple thing, which is the tax credit does not matter. The important thing is what is the home worth to the buyer and what is the seller willing to accept? If it werent the tax credit it would be the other crazy stuff like what is owed on the home or what the prequalification letter said. It is our job as Realtors to remind our clients of what is relevant and what is not.

Hey Carla! :)

This may be a case of 'damned if ya do, ditto if ya don't' because people need to feel incentivized to do anything and the HBC did that. There is, as you know, a movement to get it extended and that will bring more buyers if it flies.

And sellers who are gonna be intractable will be--this will be their excuse du jour.

You're a good EBA and this was a good post. ROCK ON SIS!

As a Listing (mostly) agent, I find it matters very little with higher priced properties. At $150k, $8,000 is a big chuck but at $450K first time buyers are really not in the mix. I know the average price of a sale has dropped and I feel part of this is more $150k properties being sold.

Hi Candice -- thanks! What's HBC?? Actually, it's been a totally mixed bag -- much like this market. I've had clients who could not qualify (made too much) buying $250,000 properties, which is out "first time buyer"market, more of less. Yes, the excuse du jour . . . they're doing that already. If they do 'extenze' ;-) there should be a mandate that this is NOT part of negotiations, as with our commission structures = unethical.

Some people just don't get my post -- you do!!

So, you ROCK!!

HBC=HomeBuyerCredit :)

There are 5 keys missing on my laptop till I get my new keyboard so I type short and often nonsensical (wink)

Hey BTW, Carla...tell them XTenz have been recalled HAHAHAHA!

Back to fake bragging...HA

Good points CHERYL PECK -- but unfortunately your comment had to be deleted. I don't allow third-party advertising on my blog posts. If you were an ACTIVE RAIN member, you might have gotten away with plugging one of your own blog posts -- I do that once in awhille. But putting in your own website . . . not cool.

Candice -- HA HA HA it's been recalled. Good one!! Thanks for the acronym education! DUH!!

I find it very interesting the mix of views. Truly one can see the optimists vs. pessimists in our profession. The 8k tax credit has helped tremendously!! As far as disclosing if your client is receiving the tax credit, in my opinion is a HUGE no-no. That is between the buyer and his CPA, yes? In the many years of practice, never got into the discussion of my clients taxes...his write offs, his refunds, etc. So why start now to muddy up negotiations. If the listing agent isn't able to shed light to the seller of that perspective, well I'm not so certain that agent is a good negotiator to begin with. Keep drama down, present the offer as written, and only as written...stop speculation and personal views. The same rule applies today for home values...it's only what a buyer thinks it's worth, and then we have another barometer...the appraiser!

Happy Selling!

Tracie

Baton Rouge, La

Not being a realtor, I hadn't thought about this side of the story. Thanks

The $8000 has helped a lot here....sellers don't ask and they are just happy to have someone want to buy their home.

The Tax credit has gotten our market moving and the free market would most likely not gotten us out of the mess we were in nearly as soon. It would have most likely gotten much worse. Remember the great depression....the free market had the chance to work its magic and didn't. The ultra wealthy who control the free market don't throw money away and only invest when it is the best time for them....when prices are at their lowest or when they think they are. So they wait until everything is so bottomed out that they can pick things up for less than a penny on the dollar before they break into their piggy bank. They could care less what happens to the rest of the country....they are usually in a position to wait it out and then strike. The government is the only other source of money after private investors....so they were the ones to invest in the recovery before it got so deep we were going into another depression. I would rather have a government debt to repay than put everyone through another great depression...and if we were in one, who knows which other country would be the ones to then step up and start to buy America at a penny on the dollar......

Larry M Grand Rapids, Mi...FIVE STAR REAL ESTATE

SEP

Tracie -- I think your point is well-taken. It should NOT be anyone's bee-wax on what the buyer will or will not qualify for, or benefit from, or have as a tax credit. Unfortunately, I have found listing agents to use the tax credit, or the "presumed" credit as a bargaining chip -- at least in my local market.

Larry . . . yes, it would benefit buyers in your State. Michigan has been hit hard!

Carla, I agree that sellers are thinking that. As a listing agent on some of these homes, I have to explain to many sellers that yes they are getting that, but it may not be for months and if you turn them down on the normal concessions and they don't buy a home they like, you maybe cutting your own throat! Come December their may not be any first time home buyers and your buyer pool may go from 20 people to 1 person and it is real hard to sell to just one person without discounting or giving away the farm.

Todd Clark - www.LivingBeaverton.com

I like your post. Just dealt with that very issue in negotiating an offer this week. Home is overpriced for the market and neighborhood. Buyer offered above market value based on comps. We received a counter and the seller's agent argued that my buyers are really getting the house for $8000 less because they qualify for the tax credit.

That doesn't change the current value of the home!!!

If a seller expects to negotiate a purchase price $8,000 higher with a first time home buyer than they would with a previous homeowner, that's discrimination. I think we need to add first time home buyers as a protected class in the fair housing rules!!!

I've seen way too many agents talk about how the $8000.00 tax credit will help the buyers but what I really want to know if will a buyer sue an agent for telling them they will get the credit when they might not? That is a slippery slope. Some have become tax people when really buyers must find out on their own if they will qualify for the money and how they might be able to get it now or later.

And for sellers to make decisions based on money that does not yet exist can be very costly. That $8000.00, should a buyer get it has nothing to do with what a seller should be willing to sell their home for. I will be glad when the deadline gets here so we can focus on the market.

We had some real "first time buyers" buying a bank owned home and this tax credit was a true gift to them. They were able to buy the home of thier dreams and the bank didn't negotiate them out of the $8,000 tax credit.

Not everyone is getting the tax credit, how would the seller know the buyer was a first time home buyer? It used to be saying that they were first time home buyers sellers would get a warm and fuzzy feeling and cut them a break, apparently not anymore. Maybe now that information should be kept to oneself.

Hi Todd. . . thank you for chiming in. Yup, December is already a, traditionally, slow time -- with the holidays and our winters. So you're telling it like it is!

Howdy Jamie! You're right -- the value of the home hasn't changed. LOL first time buyers = protected class.

Russell . . . the on-line references are good resource tips. Most, if not all, of my clients know they either are going to use the credit, or can not. I never advise my clients of what they can, rather they are telling me. So that's one issue. The blog I wrote was about sellers and/or their agents trying to use the "presumed" buyer tax incentive to negotiate. Thanks for your comments.

Hi Gary & Shannon -- I've had plenty of buyers who will "benefit" from the tax credit. Others won't. It should be information kept away from the negotiations. I've had listing agents tell me they dropped their price on the property just because they knew (their words, "We know") buyers will get a tax credit. hmmmm . . . not all of them, and none ya business if they do / don't!

SEP

I don't understand how it comes about that the buyer's financial situation and/or use of the tax credit is being discussed with the seller.

I do NOT discuss this Elite Lending. Please read comment #5.

When my offer comes back to me, countered by the sellers, and the listing agent says to me, "The sellers aren't going to ______________ (fill in the blank -- accept less then list price, offer seller concession, etc.) because your client is getting the tax credit . . . "

Hmmm . . . this is what I have had occur time and again.

I've seen FOR SALE signs that the listing agent has added a sign-rider stating: "This house qualifies for the $8000 tax credit"

That is SO bogus, and not cool! There is NOTHING in the credit that says a house "qualifies" . . .

I've read listing sheets where listing agents PROMOTE their listings with "Take advantage of the $8,000 tax credit -- BUY THIS HOUSE!"

Tell me just how I am discussing that? The listing agents are using it -- unethically IMHO -- to advertise their listings, negotiate for the seller, etc.

Wow, I haven't seen that happening around here. Then again, I've been a lot busier with the buyers who are looking to take advantage of the credit than with sellers. Personally, I think it's had a fantastic impact in m y area!

Kristen . . . it's been a benefit to a lot of my buyers too. The point is . . . it is NO ONE's business what the buyer is entitled to. It's a tax credit . . . it's something that is not part of the real estate transaction. We do not negotiate based on our client's "benefit" "advantage" etc. It should not be a part of the negotiation process, and it's none of my business. It's between my client and their tax preparer. I do not give tax advice, do you??

SEP

Carla:

I know you have interated this point a dozen times now and just above. So, now I understand that you agree that the fact of whether or not the buyer is getting an $8,000 tax credit is of absolutely no concern to the seller - none of their business.

I am, however, interested and surprised about what you are saying that some listing brokers are doing by marketing their properties with the tax credit as part of their marketing. I haven't seen that yet and I can see how this may sway the seller. That is unfortunate, but, as you say, you do not disclose private information about your buyer clients' financial abilities. And, that is how it should stay - It's none of their business.

Carla: None of my sellers feel this way at all. Not one seller has ever cared a hoot about the buyers tax deduction. I've got news for you - people here working on green cards with large corporations can't take advantage of the tax rebate either. So too much money has nothing to do with it necessarily.

Hi Claudette -- when the tax credit was "new" and the market was very slow -- there was no mention of this at all. With the increased activity, and the 'it's no secret' with some buyers being able to qualify, I have seen listing agents use this in the MLS, on sign riders, in their dicussions with me, even at an escrow signing recently, the escrow officer asked my client -- the buyer -- if they would be getting the tax credit. HUH!! NONE of escrow's business. No one asks if the buyer is getting EIC (earned income credit). And with that type of question, my client -- who could not benefit from the tax benefit because of income levels -- what could be said? Is it the escrows officer business to know the buyers tax bees wax?? I'm going to be taking a picture of a listing agents sign rider "This home qualifies for the $8000 tax credit" . . .

Hey Lyn . . . I've got news for you too . . . I never received an $8,000 tax credit when I purchased any of my properties. So boo hoo that not everyone gets to benefit. And if green card employees of large corporations want to buy a home, they may. And when they sell they can be subject to FIRPTA.

SEP

None of my guyers seem to care about the tax credit.....I'll take it.

OCT

2nd post here on ActiveRain and I'm rather enjoying reading and talking real estate ad nauseam. :)

RE STIMULUS:

I think the "Cash for Clunkers"had Americans spending money on items that depreciated and for the most part profited nations outside of the US i.e. Japan with Toyota and Honda sales reaching great highs.

At least with the First Time Homebuyer's Tax Credit program, the money is/was being spent on real estate, something that ultimately is a great long term investment for any American. It has recycled US dollars into our own backyard with retail spending and sales climbing because of item purchases for the new homes and entertaining. More sales, more jobs and industry to respond to demand.

Now don't get me wrong, I too am VERY concerned with the long term effects of a growing deficit. It's fast food money and we'll feel the harsh affects of it much sooner than later. If we can get the gov't to spend the money much more WISELY and not panic spend by throwing billions away to areas that will not promote the US within (in the long term), then we can hopefully make it out of this mess.

DISCLOSURE RESPONSE:

I had one seller's agent ask me if my buyers qualified and I responded by asking her how much equity did her sellers have? I already knew the seller was making quite a profit off of it having not refinanced since the late 90s, so that pretty much shut her strategy down. It was as much my business what her sellers were going to get out of it, as it was hers what my buyers were.

Hi Andi -- Welcome to Active Rain. If you need any help, let me know. It can take a while for the "learning curve" ;-)

Good comeback about asking the seller's agent how much equity they had. Good retort!!

Looking forward to seeing more of you here in the Rain!!

Thanks Carla, this site is great! Oh and I realize my response reads kind of rude, but I asked in an "Oh by the way" tone, so that it was a "softer, gentler" velvet covered bat upside her head for asking such an invasive question. :)

Like I said, Andi . . . can't wait to see more of you on the Rain!! Softer, gentler velvet covered bat! You're good! LOL!! POST A BLOG ALREADY, can't wait to read it!

;-)

*blushes*

I only became a member of the site to read a great blog that I was sent. I've since found many bloggers I enjoy reading including yourself. Slowly but surely the lure of posting my own blog is starting to pull on me though (or is that just my vanity of wanting to hear myself talk?) I not sure yet. I need to figure it out and post the aspects of this career and the passion I have for helping our clients or else the only reader comments following my posts will be corrections about my grammar and punctuation (i.e. its or it's) Ugh. :)

What you just wrote, Andi . . . now that's a BLOG!! "I only became a member . . . "

Take the plunge -- jump in! It's fun! Addicting, but fun!

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