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A completely new proposal to save the real estate market. It's not as crazy as you might think!

A lot of real estate agents are speaking as if the door on real estate sales will be slammed shut if the federal tax credit for first-time homebuyers is not extended. And while this opportunity to collect cash has had a very positive effect on sales in the lower price ranges, it really hasn't meant much to sellers with homes valued in excess of $200,000.

My preference is to let this credit just go away. The expiration of the credit could actually lead us back to a true fair market, where buyers buy because they need a house rather than just trying snag a great deal with future profit potential.

I would like to propose an alternative remedy to help sale in all price ranges. My proposal would really create interest in buyers that could really stimulate the market, and it is the only remedy that I have even seen proposed that would actually correct the mistakes of the past.

The solution I am proposing is to make all down payment monies for a personal residence up to and including a cash sale an income tax deduction. Not a refundable credit, just a deduction against income.

This also would encourage buyers with both cash and significant incomes to get back into the market. It would lead us back to the days when more down payment was better, and smaller mortgages would prevent the short position debacle that we are experiencing today.

The higher end market would see an extensive boost in sales, and prices would stabilize. And once again, homeowners will be encouraged to have equity in their homes to cushion them against negative market forces.

So what do you think? A dollar for dollar tax deduction for down payments on a house sounds like a good idea to me!

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Posted by Richard Weisser - Coweta Fayette Real Estate - Newnan homes for sale on 10/23/2009 07:37 AM

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down payment tax deduction, income tax deduction

Originally posted at: Coweta Fayette Real Estate & Newnan Homes for sale blog by Richard Weisser of Better Homes and Gardens Real Estate Metro Brokers: A completely new proposal to save the real estate market. It's not as crazy as you might think!

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216 Comments on A completely new proposal to save the real estate market. It's not as crazy as you might think!

OCT

I like that idea. I could see sellers selling to take the cash and spend it as a deduction...It will not work though as I do not see what is in it for politicians... BTW, another nice photo!

Richard I like this. I am 100 percent behind this. It certainly would encourage larger down payments and mean people would have more skin in the game. This in turn would lead to less walk aways. Love this idea you opened my eyes better than my espresso this morning

I like the idea too You need to convince the government gods though :) They would take something simple like this, and turn it into a complicated mess.

Richard,

The concept sounds like a sure winner in theory. Now, there is that pesky implementation thing.

Rich

This makes way too much sense... It couldn't possibly appeal to the politicians, but maybe you should pass it on to your State Association of REALTORS and NAR. Somebody there might like it and have the clout to make someone listen.

I like it way better than the extension of the $8000 which I was and am still opposed to.

I think thinking outside the box and doing something different might work, never know unless you try!

Hi Richard,

Sounds like a common sense approach. I too believe it would encourage buyers with cash and significant income to get back into the market. Yesterday one of my listings just got a cash offer and last month we closed another. There are buyers out there that can make a purchase and with this incentive maybe more would decide to make the plunge.

Richard,

This is the best idea that I have heard. Then it is as Richard I. said it is the implementation thing that could be the problem.

It makes a lot of sense to me. It encourages homeownership and gives everyone the same opportunity to make a down payment and acquire equity at the same time.

Richard - Your approach certainly accomplishes things that the current tax credit cannot do. I agree with not making it refundable, but I think we'd need to place a reasonable cap on it, but overall, you have my support. Now if we can just get our senators to use their brains instead of taking the easy route.

Gary...

Ah, the politicians. Now there's the problem. Thanks my friend.

Charlie...

I really think this will work. Thanks, and have another cup!

Jackie...

I think the perception would be that it will help the rich, but don't we need to get people with money back in the real estate market?

Rich...

As Gary said, it would never fly politically, but I think that it would have a tremendous effect on the road to real estate recovery.

Margaret...

I think that some version of this idea has true merit! THX.

Edward...

And think of the effect on the higher end market. Wow! Thanks.

Cheryl...

The idea just popped into my head as I was writing my morning post ... but the more I think about it, the better I like it. Thanks for the comment.

Dorie...

And aren't those the kind of sales that would stabilize the market? I really think that this would move us back into the world of saving for a down-payment and having equity in a home from the git-go. Thanks, my friend.

Don...

I don't think that it could happen, I just think that it would work! Have a great day my friend.

Richard that is a terrific idea. It would work in our Country also. It needs to get in the hands of someone that sees the light. Even if they made it for 1st time Buyers, it would put a spur in the market.

Good thinking...

I like the idea and think it could make a positive impact especially with move up buyers. My concern is that I don't see how politicians could spin this so that they either get more power or more votes.

I like it! The homebuyer tax credit is just not enough incentive. We need something more substantial!

Richard...sounds OK, but I would prefer that things get back to normal without all the incentive programs. Until it does, we will have these huge swings in sales and market problems.

The idea is interesting ... and certainly higher end buyers would jump on this, which is good because the lower end always moves. I just wonder how the gov't could calculate their loss in this? I would love high end homes to move, but I am still not sure more gov't is the answer.

Hi Richard:

I've been voicing my opinion on the tax credit also, that it needs to expire.

Down payment monies be an income tax deduction...What a FANTASTIC idea!

It's simple and it makes sense. I'm 100% in support of this!

I have been proposing this for months. It really makes sense. The market would snap back, I believe. And, as you put it, it would be a true market adjustment. Great post.

And you propose to get this passed by a Democratic controlled house and senate with the biggest social spending President in over 70 years? Obama would be more popular sending 100,000 troops to Afghanistan than to propose an incentive for higher income families to benefit from such a program!

Considering the recent report on fraud I would say your suggestion is timely. The stimulus has to end sometime, and your proposal looks like a soft landing. Besides, the 1 billion per month that an extension would cost may be too much for us to take right now.

Richard,

I am for the tax credit expiring. (The end date is what stimulates the market.)

The tax credit has done a great job in stimulating not one, but two markets: the first time home buyers, and the first time home sellers (who then become second time buyers).

But, the most important thing it has done, was to plant the seed of buying a home. A lot of the first time home buyers, hadn't even really thought of it as a possibility before.

We must keep the eye on the ball: So the credit expires, and your suggestion would work great to foster the thoughts and possibilities of buying and selling in all levels of the real estate market. The deduction would be great to have.And stimulation continues...just in a new format. I like it, for sure!

On a side note, gorgeous fall photo!

I agree with you about letting the credit expire. But I also am not for anymore programs that would lead to more deficit spending. Of course I'm for the repeal of the IRS and the Fair Tax and that's not going to happen either.

Richard: LOVE IT! I think this tax credit is spoiling folks. Buying a home should not be based on the government giving you $8K. That was my Underdog you just read about. His main motivation was to get money the government was handing out. As you can see, if that is the sole motivation, it's not enough. Your idea creates an incentive for folks in all price ranges and gives them a benefit to do that move up....which is what is lacking in today's market.

This is a great idea! Hopefully, someone in will DC will read your post and run with the idea!

Lets form a committee and do some research an impact statement and split up into sub-committees. Oh but wait its Christmas break and we need to be home with our families. Well maybe next year unless I'm running for re-election but it is a good idea I'll get back to you.

I like this idea. Seems like a good one - call your congressman/senator.

Richard - sounds like the best idea I've heard. But it probably makes too much sense for the politicians!

I think this is a creative and worthwhile idea. It looks like the $8,000 credit will expire. This is especially true with the reports of fraud with regard to the tax credit.

We all need to contact our political honchos and pass the word on this one. Awesome idea. Its only donwfall is it makes too much sense and since governmnet is lacking in that area.... well you get the picture

Great idea! Should we get a petition together and send it to our law makers? I love it, especially for the high end clients who are looking for some place safe to put their funds. It sounds like a win-win.

Interesting concept. Does it apply to first time buyers only? Could the proceeds from the sale of my home that I use as a downpayment for my next home be tax deductible?

The one down side to this great idea is that it opens the door for Congress to try and take away the write-off on interest that we currently have.

They've been trying for years. If you can implement your idea and keep what we have in place, I'm all for it.

Great idea! I think you're onto something with this one. I think the tax credit expiring will be a good thing as well and it will let the market readjust so that we can see what's going to truly happen next spring. We're already coming into the seasonal slowdown..that will give people a chance to let it soak in that it's gone and not coming back. I think next spring is going to rock!

I think that idea is better than just giving 8k away ,,,,sigh but if you are not a in congress it we will probably never see it happen

Richard, you are a genius. That is a great idea. Congrats on the star. The only issue I see is that this idea is so good it will never see the light of day. It just makes too much sense!

Great post. Excellent points! Thank you so much for your time.

Richard, because it is such a great idea, the government will probably never consider it. Good thinking though!

Hi Richard.

I don't believe the real estate market needs saving...

Ken

Larry (above) mentions one downside - are there any others that would derail a great idea like this?

Richard, great idea! But the so-called government Gods will need to get behind this ... and if there is nothing in it for them...well need I go on.

You are right that we need to get to people buying a house because they need a house and most important they can afford a house. This idea sounds good to me. It would help everyone across the board. I think you're on to something!

Hi Richard~ Now there is an idea tha makes sense! We need to keep the government OUT of our business, not IN it! If we can get those spending the money they already have, then maybe we can get some of the economy turned around.

Great idea, now the challange is to get the congress on board to listen to a reasonable plan.

Richard, that's another creative idea, but it is still using the government as a crutch. Normalcy will return in two ways 1) get rid of the first time home buyer credit and 2) the job market rebounds.

Richard - That's a bill that would get my vote! It makes so much sense and because of that, it'll probably never happen. Good idea though. :)

I like it! Write it up! Get it Signed!

Richard,

Totally agree. In fact, I've been proposing the same thing to my friends - just didn't write it up and get a feature for it. Congrats. :)

Steve

Great idea! How do we get it noticed now?

Richard, I can see you have put a great deal of thought into this idea. I would perfer to see the price of homes come down to match the available earned income. A good income in my area would be about $70,000 per year. That would allow the average person to qualify for about a $180,000 home. Yet, the average home on the market is asking over $250,000. I can go over the math with you and every home owner has to who I should market the house to and what the income is for that type of buyer I will get the same blank stare.

Here is a little commentary from my local newspaper today about an article that ran in the NEW YORK TIMES (that "liberal" ink) the day before: http://tinyurl.com/ygfgrol

Maybe, we should think about where peter is getting the money to pay paul before we send the NAR lobbyists back to Washington?

Just my opinion. Nice post.

I like that idea since that would have a better effect on a wider range of buyers.

I love this idea and totally agree that the move-up/higher market is what has been devastated the most. First-timer homes seem to keep moving no matter what, but everyone else has been stuck.

I think jobs would help more, but I'd be on board for your solution too!

Hmmmm...I concur that it is a great idea, Richard, but I have questions as to how it would be implemented fairly, and if it would spur lower income brackets to actually start saving in order to benefit form it.

I am tired of using my tax money to 'help' everybody. The government needs to balance their budget before they try and help everybody, automakers, home builders etc. Let the market correct and get on with it.

Richard - very well thought out idea. I do have to agree with Gary Woltal's comment. The job market has to rebound, at least here in my neck of the woods, until we see a stabilization in the housing market.

Hi Richard - I like this idea - the best part about it is that there would be some REAL money back in the housing market, as people would be encouraged to put their best foot forward on the down payment. I do think, however, there should be a percentage cap on the amount - say 40%...

Richard - that makes more sense than anything I've heard so far. Brilliant! Now....go sell it!

Richard. This won't work. Can't work. No way, no how. Why? It makes too much sense. It's logical, fair and ethical. You honestly think you can sell THAT to government?

This is a great idea, but it might be a tough sell with the politicians...... Do you think it will cost more than the $8,000 tax credit?

Wow, I love this! What a creative concept; just the kind of thinking we need right now. It would put more money into the banking system without a government program and encourage people to make good long term investments in housing.

Great idea but here's the problem.

It will get demonized as a way to give the rich a big tax break. They'll say that someone who can put $500,000 down will maybe get a tax break of $200,000 while the poor guy who can only put $5000 down will only save $1000 in taxes. Those who can afford to put that much down don't need a tax break. Haven't we heard this before?

I like the idea. I am sure there would be caps needed to make it work. I would throw out the idea of documented improvements to a home as deductions. Invest $10,000 in a home and get 20% tax credit.

That is a much better idea than the current tax credit. Why the current plan has not worked is due to the fact that it is only targeted at first time home buyers, who make up a fairly small amount of the home purchasing public. I think the next round will need to focus on portion of the population that can get approved for a mortgage and have the money to follow through. Many investors would jump in and help to stabilize the market. I like your idea

Brother Richard - Interesting idea. I have to agree that it would most certainly help the higher end home market. Even here in San Antonio, where we don't have lots of million dollar homes, we could use a boost in the over $200K market (and hey, the million dollar homes would be a nice addition too). It gets people into the home with stable down payments and they could even set limits on how much is tax deductable (ie, no more than 20% down, or 15% of income, or something) so that they didn't feel they might get people just looking for a monsterous tax shelter. I have to throw my vote into the ring - go for it.

Richard - I like this idea way better than the tax credit as it stands. Nice job getting the creative juices flowing!

To all...

As far as a cap, since this is a non-refundable deduction and not a credit, no one would get any greater benefit than their total tax liability.

Think of it this way ... the tax is based on income ... putting money back into the econimy is the opposite of income ...

It all makes sense.

But politically, there probably has to be an actual dollar cap to make this work.

Richard: Nice out-of-the-box idea. Whatever is decided upon, I think we're all in agreement there needs to be some incentive. Personally, I liked the Nehemiah and similar programs. We shall see what they come up with this time. Take care.

Richard - I love this idea. How about throwing this at your Congressman and Senator. This is the type of forward thinking that would have lasting implications on the job market in that it may propel new construction.

Great idea and uses common sense... unfortunately not much of that is currently in Washington. Can we start a grass roots movement... start up the bus! :-)

I am a fan of just letting the market settle itself but your solution is much better than a continuation of the welfare program called an $8,000 tax credit.

It appears we all like it !!! Great idea - can we send it in a e-pettition to NAR ???????????????????

But Richard, this is too smart and makes too much sense for it to ever be enacted! :-) Great idea, though!

What a great idea Richard and it seems that it would really work, but I am doubtful that this would ever be implemented much like Marney. /\

Things that make sense don't always appeal to those in high places.I do like the idea though.

Patricia/Seacoat NH

Good idea . . . with a MAXIMUM amount per year, so the amount could be carried forward for up to 5 years.

(Some of my clients put a lot down, and there's no way that they could deduct the full amount of the down. They would would BENEFIT greatly if it was a maximum per year deduction which could be carried into the next years until fully recovered.)

Interesting concept. I keep hearing how this is all about the first time home buyer. Nobody seems to think about the person that is selling that home to the first time buyer, where do they go. They most likely move up. So then they buy a $300,000 home and then that buyer moves up and so on and so on. That will eventually trickle up to all segments of the market.

Hi Richard - It does sound interesting, but it also sounds so simple that there must be some impact that I just can't see (call me a skeptic - I always look for the catch!).

It might help... But I think we need to have the government concentrate on creating jobs... probably through tax reductions...

This sounds like a very intriguing idea though I expect the government would want to limit it. Also, what if the down payment is in excess of the year's tax liability, would it pass on to other years?

OCT

The Washington crowd may have a problem getting over the short-term loss of revenue.

Richard, Great idea - I don't believe we've seen the end of the good ideas and solutions that will be brought forward to workout the problems in the housing and banking industry.

Great idea! We could certailny think of some variations. Making saving money for a downpayment attractive is critical and required to change a mindset of an average American.

Congress won't have any problem passing something like this as long as there's a couple billion dollars worth of pork thrown in with it...

I think the tax credit did its job. The tax credit when it first appeared was a stimulus for people to get off the fence and take the plunge, that was its purpose. its time to end and i like your idea a lot. Great concept, good imagianative thinking. Thank you.

Richard - Although I agree with this idea totally the only problem I see is that many people have blown through savings, lost retirements, much of their 401k's because of the economy and/or job losses. The bigger the down payments the harder it is for some to come up with such down payments. I am talking about real good stable buyers here. Not the people who never saved a penny thinking they could purchase a home with nothing. I am talking about the honest to goodness people who saved their entire life, preserved their credit and the economy got the best of them.

What a great idea! Imagine a tax break that EVERYONE could actually benefit from - not just a select few. Imagine a reward for working hard, saving money and investing in a home instead of a handout. Why can't our politicians think up stuff like this????

That's a great idea. Not sure how congress would feel?

Two thumbs up !!! This is an excellent idea. Too bad that one of our politicians didn't think of it !!! But, I'll write my congressmen and representatives about it anyway. If enough of us do, we could get this implemented by spring !!!

I feel that we need to let the current package expire. No matter what is done, it inevitably comes backt o roost in taxes for all to bear, especially future generations.

great idea! End the tax credit, bring on more accountability for the buyers!

Awesome idea! It makes sense on so many different levels....people who can put money down (as everyone should) would be able to see a tax benefit and it would encourage people who otherwise might not put much money down to put more down - which means there would, hopefully be many less people out there that are upside down on their homes.

Great idea! We are in a luxury market and luxury sales although no hurting this year could do with a boost and it forces buyers to do something for their credit other than work out some other shoddy loans.

I have wanted to ditch the credit for awhile. This sounds like a good alternative as long as there are limits.

Like a tax credit for the first 10k-20k used as a down payment or some such thing.
Income caps - no! Let's encourage EVERYONE to get involved in the market. Part of the problem with only giving incentives to first time home buyers is the middle to upper price home market has remained stagnate and suffered severely still in most markets (especially those markets hardest hit AZ, NV, FL, CA) Those 1st time home buyers are buying primarily bank properties, not 'traditional type' homes that encourage a trickle up effect.
Primary Home full credit, 1 per year.
Secondary or investment home only 1 per year and only 1/4 to 1/2 or what a primary home would be eligible for.

Thanks for the idea - I like it! We need to encourage another segment of the market, this would do nicely!

follow me on twitter

This is a great idea, and we need great, innovative ideas.! In my neck of the woods, JOBS are all-important to real estate success, so your idea might help to stimulate jobs in the construction and other industries tied to real estate. Banks are going to have to loosen up, especially on commercial credit. I like your idea, though, maybe with a smaller ($2000) tax credit for first-timers? There are still a lot of 100% loans for first-timers here, through credit unions,USDA and others...

Great idea! Would definitely boost all markets instead of just first time buyers.

Richard, Great idea, only politicians will stick it a bill that has thousands of other bills in it that would probably hurt it. I'm all for it though ! Great idea. :)

I love this idea! I'm going to be forwarding this on to my Senators and Congressmen both Federal and State to see if we can't spur some interest! This is a conversation that needs to start!

Donna Dastic, Realtor GRI, ABR, CSP

I truly like this. It would give more activity to the higher priced houses as well. Sure there would have to be limits on the amount, but it could bear fruit. The government has always tried to shape our activities by changing the tax code. Excellent. Also agree with Donna, forward on to our Senators and Conbgressmen.

So I'm #100 to say I like this idea a lot too! We have to get the middle and higher end buyers back in the market!

Richard,

Great to see "out of the box" thinking. We need more of that, so congratulations.

Great Idea Richard.... But much too logical to fit into the IRS tax code. Tax law needs exceptions and limitations.

It wiil be interesting to see what happens to the low end of the market when the $8000 credit ends.

My guess is that we see prices drop.

If you really want this to work, include the credit on a second home. Give the small investor a reason to get back in the market.

While I personally like the idea, I fear that the those who wage Class Warfare for political reasons - that is the self-proclaimed progressives - would immediately label this another "Tax Cut For the Rich!" In order to fly politically it would need to benefit more of the portion of the populace who pay no taxes but receive plenty of benefits from those of us who do.

If this idea went into the meat grinder on Capital Hill what emerged would probably be a credit payable even to those who didn't pay taxes that disappeared gradually as AGI increased so that those making over say $250K AGI would not get any benefit. The Chairman of the House Banking Committee might like that one.

The government will not do anything to get the middle and higher end buyers back because they are after all part of the [undeservedly] Rich!

The less the rascals in Congress and the Administration mess with our business the better.

Jim Gilbert, RE/MAX Olympic

How naive to assume sellers in upper priced homes aren't benefitting from the tax credit. Who do you think is buying from them, or from their purchasers? Without a first time buyer coming in at the bottom of the market, NO ONE ELSE MOVES.

The real solution to solving this problem, stabilizing prices and absorbing inventory is to limit the tax credit to purchases of owner-occupied properties only, guaranteeing that every first-time buyer will buy from a PERSON, not a bank, and stimulate the trade-up cycle. Every first time buyer has the potential to generate three or even four sales, the potential to stimulate new construction and job creation -- yet we are giving them $8,000 to take a house off the books for a bank. When a first-time buyer buys a vacant foreclosure, no one else moves.

This mentality of "the tax credit isn't helping the trade-up market" is ridiculous. I have a long line of trade-up buyers who will buy again or build. They aren't looking for a tax credit, or a tax deduction to encourage them to trade up. They're stuck in the homes they already own with thier noses pressed against their window looking for a first-time buyer, and watching those first-time buyers buy the foreclosure next door instead.

An interesting proposal, with equally interesting arguments. I agree, the tax credit should go away, otherwise we will fueling a long term "entitlement" that many would expect to last forever and even grow in size. Let the market find its own bottom and then we will begin to see stabilizing and eventually growth in the real estate industry.

I personally think the whole thing should just expire. If it doesn't, then the low end housing buyers will feel absolutely no sense of urgency since it will become the perception that the credit will always be around so "why rush".

If the program continues I think your idea has merit but the effect will not be the same as the current plan since it targets a different set of people.

I guess it depends which segment of the market you want to stimulate.

Current Plan - Starter Homes If someone is buying a starter home with and 5% down FHA loan they can get something livable for $160 and basically have their entire down payment be refunded. This moves a lot of young folks into their first home and removes low price-point homes from the inventory.

If you provide a 5% tax deduction in the same scenario the return back to them would be only the percentage of their tax bracket - let's say 20% or $1600.

Proposed Plan - Move Up Homes If a buyer is purchasing a home, for say $400K and is putting 10% down with a conventional mortgage and they are in a 25% tax bracket they would get a return of 10K which would certainly be an incentive to them.

So I guess one must decide which option is better based on whether it would help the economy more to boost the starter home market or the move-up market. I really don't know which is better.

Stroke of genius! Did you think of that yourself?

Richard, I echo many in that I like your proposal. It would certainly spur the investment property market and second/vacation market. I dont know that it will entice those in the 200K plus range but it is certainly worth the chance.

Thanks for your insight Richard. Love the photo you posted too!

I believe this concept has way more merit than anything else I've heard. It could be simple to impliment if there were any common sense people power left in Washington, but that's certainly questionable. Here in Michigan the first time home buyer credit is largely going towards the purchase of bank owned homes so it is not helping the move up market. Many of the owner occupied homes being bought using the credit are moving OUT of Michigan due to lack of JOBS.

Your idea is creative and makes perfect economical sense. I'm not sure our realtors UNION (that thing we call NAR that we are forced to pay money to) would be of any help as they are so heavily invested in using the money all of us have already paid in to lobby for an extension of the home buyers credit.

Great idea! Are you running for president in the next election? I think you could win the Nobel Peace Prize with this idea.

Could you explain it one more time, only write slower this time, just kidding, makes total sense. I would do the market well to get some money from the sidelines.

Isn't there anyone that disagrees with you on this? Its the same thing as the tax credit, just less money to the buyer. this is not what is going to bring back the housing market.

many first time home buyers and home buyers in general pay little or no income tax already due to child tax credits and standard deductions and exemptions. i do agree this would help people with higher median incomes who do actually end up owing uncle sam at the end of the year.

the problem with market is simple. too many homes, not enough buyers. also, many of the people who sell their home "short" end up renting or living with family, as their credit is shot. its obvious we need more first time buyers, the problem is getting them qualified/approved for the loans. many of you have no idea how difficult lenders have made it for everyone to get a loan, compared to recent history. (i wont go into details on that) throwing money at the problem isn't going to fix it.

we need to bring back low and no down payment programs. these programs are/were not the devil. i agree they need to be revamped, but brought back regardless. there are so many people out there who have depleted savings due to job loss or income reduction, the pool of 1st time home buyers with down payment money has shrunk dramatically. i think we can all agree that job loss is a big contibutor to the current real estate market situation. we also need to restore confidence in the market, and get values heading north again. many people do not want to buy in a down market, as they fear values will continue to drop. i say there is never a bad time to buy real estate. and now is a great time to nuy real estate!

FHA's default rate is now up near 15%. It used to be a fraction of that. Is it because they made risky loans loans? no. there was never any stated/stated purchase programs via FHA. they are suffering collateral damage because of job loss. we need to get people working again so they can start buying. there are only so many fence sitters, but there aren't enough to soak up all the excess inventory.

If you wanna see my take on the solution to the problem (part of the problem), go check out my blog. Although, I do respect and applaud your proposal Richard, i just don't think its the answer.

wow, what a great idea.... something that will not cost the tax payers money!

I will bet a Yankee nickle that if our fearless leaders in Washington did that, they would actually see more revenue come in to their coffers. solely based on more market activity. More people buying homes, more people paying property taxes, more people going to home depot and buying stuff, which in turns mean they will collect more taxes. I have never believed that raising taxes would generate more money. Giving people an incentive (eham, not taking their hard earned money form then) DOES!

One would think that after 2000 years of case studies they would have this figured out...

I'm a FairTax guy, myself. I'd rather see a big push for an across-the-board tax system "flush". Let's start it right, with the FairTax.

Richard,

Innovative thinking like this is so necessary in our industry. Thanks for sharing. Each of us should send a copy of this AND ALL THE COMMENTS to our member of Congress and Senators.

Jay

I've paid cash for 2 investment properties this year using a line of credit to buy them. The first was for 31K. The second was 55K. I would love to write 86K off my income. Guarantee you I wouldn't be paying any taxes at all while this would be in effect.

I think an even better stimulus would be to cut government at all levels by about 50% and at the same time cut taxes at all levels by the same. Even during a recession, my biggest expense by far is all the taxes I pay to all levels of government - income, FICA, sales tax, utililty tax, property tax, deed stamp tax, tolls, licenses, etc. Probably paying $40,000 or so again this year.

I personally love that this plan is not for just "first time" buyers. And it does make a lot of of sense. I still wonder why there is no support for investors? Why are they always left out...

No subsidies at all please... they are causing chaos in markets that have already corrected. Let's get back to where values should be and let the prices sell the homes. If somebody says they need subsidies to sell homes.... maybe they should consider getting into sales for the Scooter Store where Medicare pays for those Wonder Scooters... or whatever they are called.

I certainly agree with you though concerning lower mortgages helping the economy.... the economy is in this mess because of High prices aka Big Mortgages...

Mortgage = In debt to Death...

Amen Rob (post 120). Instead of tying taxes to behavior, we should have govt stop blowing our money and printing more when they run out. Fair Tax looks good.

I sell REOs and the tax credit has not increased my sales at all.

Apologies for throwing the monkey wrench in this theory BUT a deduction is not better then a tax credit. A deduction is only a percentage based on your current tax rate. Most first time home buyers are in the 10-15% tax bracket which would mean they would only realize a 10-15 cent refund for every dollar they put down. Do the math, the 10% bracket loses, the 15% wins slightly. Not as much incentive as an $8,000 dollar check in April. Any tax professionals out there want to chime in on this? There is a lot of talk about extending the credit and increasing it to $15,000 which is why many may be waiting on the fence. It should be explained though, if this happens it will be before the end of the year and if you buy now you would still be eligible for the larger credit since taxes are not due till April. If they wait and the extension and increase does not go through, you lose all around.

To all...

I am constructing a new post to address some of the concerns and to summarize the positives.

These are some of the best comments I've ever had on a post. It's a tribute to ActiveRain and a community of thought that is as diverse as it is powerful.

I am humbled by your responses. I appreciate them ALL more than you will ever know.

And now I have work to do incorporating all of this input into a detailed plan!

I love this...this would prevent people from buying houses they can't afford or shouldn't buy which is how we got into this mess in the first place.

BTW....

Perhaps it's semantics but I never consider letting someone keep THEIR money a subsidy. I don't believe that the government is ENTITLED to our money.

I still hold the notion of private property rights.

And yes, I MEAN deduction, which is not an expenditure, it is a reduction of revenue.

The idea is to stop repeating the mistakes of the pst.

We have buyers in our area getting paid $8000 to purchase a house. They have NO skin in the game. No down-payment, no closing costs. This is a formula for disaster again, only with different people.

Ha... Barb ... you beat me to the punch!

Makes WAY too much sense.

Now here is an idea worth spreading around town....and country - the whole country.

It wouldn't stand a chance of being adopted without an upper limit on:

1) the percentage being paid down......say max at 20%.

2) the total dollars of the deduction....say max at $100,000.

It would also have to have a requirement that the home remain a personal residence for some period of time...say minimum of three years (like with the current $8000 credit).

I do like the idea of letting the tax credit go away.

So are you proposing that I could be tax free forever by selling and buying a house equal to my income each year? The resulting deduction would cancel out all my income. If I was in the $1M+ category I could "earn" another $300K or so just by flipping a home a year, right?

Not sure what i think about your proposal but at the least I think it would have to be limited to a percentage of total sale price and to homes with a sale price less than a cap.

Maybe up to 20% of homes less sold for less than the FHA Loan Cap.

I LIKE IT!!! you need to write a letter to Tim Geitner, Barack Obama, Barnie Frank and anyone else you can think of that has anything to do with the housing market fiasco! Get busy,...this is something that I think will actually work and not cost the government billions of dollars!

Good work...keep thinking.

Clarifiication .... Your idea is certainly better then the tax credit because there will be skin in the game... or.... give up to $8,000 in tax credits for improvements made to a property...

Skin in the game is the key..

I don't believe the idiots in Washington will be able to deal with anything that make sense. I still keep hoping that one day some common sense will appear.

I like Jim Hale's comment. with limits.

Hmmmm, what would the pay for a consultant be to evaluate this proposal? I'm sure if presented it would "go to committee" for outside counsel to evaluate. Thanks for the illumination and my new 2010 real estate designation "consultant". Probably would need a few more on the "committee" so all who answered this would certainly qualify and we could have a sub-committee or two as well to investigate, Let's take it to the "appropriations committee" behind "closed doors" so we are in vogue and after a year or so we'll need to reaccess our findings and request a time extension so our legal counsel can "read" the 1000+ page findings report and tell us what we knew 18 months earlier.,,it'll never fly! But, we got paid (bailed out) and we don't have to pay it back and perhaps we'll even vote ourselves a raise if not well deserved big buck bonuses! Yikes, what a concept!

B.R. "Ben" Burch

Burch Realty & Inv. Co.

Perhaps the elimination of Capitol Gains taxes on residential investment property might help.

Lots of comment above about getting the government out of housing:

The government is all over housing and isn't likely to get out:

Direct provision of low-income housing.

Rent assistance programs.

Rural housing loan programs.

Buy and rehab loan programs.

Mortgage interest deduction.

Allowance for depreciation (an accounting concept but only because of the internal revenue code).

And more...

Way to think out of the box, Richard. I also like that this would help reduce the fraud recently reported with the credit. Did you read that the IRS found a 4-year-old child's name on a credit claim?? Unbelievable.

Sounds like a good idea, but I agree with many of the posts regarding the buffoons in Washington

And I agree with Tim M's comments in a prior post... see below...

Great idea but here's the problem.

Brilliant Richard! This goes to show you, we don't need politicians running this country...just a courageous, person with good sound business sense and morals!

Many concerns above about the politics of class warfare and giving a tax break to the rich:

Only the "rich" (my definition: those with above average incomes) pay income taxes in this country:

Couples with children and incomes under $30,000 pay no tax (and most get money back from the ongoing fully refundable earned income tax credit).

The entire bottom fifty percent of all tax filers pay a whopping five percent of all income tax collected.

Richard,

I really think you're on to something here! Looking forward to your next blog with some of the details hammered out. BTW...spectacular autumn photo.

Not a bad idea; but what we need is a national effort to create JOBS...when American's have stable employment and are comfortable that the paychecks will continue they buy things, HOMES included.

Richard, I think that's a fantastic idea! I wish there were more politicians who thought like you. Who knows, maybe someone higher up will see this post!

On first thought it sounds like a fantastic idea and I love it.

I just wonder how that would really effect the market?

Currently in my area, cash buyers are out in groves. Many of the REO's are accepting cash over conventional, FHA and VA. It is already difficult and frustrating for the first time home buyers who are in the position to finally buy, keep getting beat out by cash buyers. It does not matter that they come in at the edge of the highest comp. Often having to bid on 5 - 20 homes before finally getting an acceptance. Almost all REO's have between 20 - 86 offers for a variety of reasons. So what that do if even more cash buyers entered the market? If the bank accepts cash over others and brings the market down (as it has done many times this year) how will that effect all those home owners that are working hard to keep their mortgage? I am not sure how that would effect the market and I am definitely no economic expert so what I would ask is would that make the rich richer and the poor poorer? I definitely think it would stimulate the economy however I personally am uncertain of the ramifications.

Or... would it stimulate it so much that they would release the REO's that they are holding on to, by way of controlling the market value to a point thus helping the economy to recover faster?

And to add to the pot....it seems like lately some of the banks are beginning to play hard ball (especially on the 2nd's) in regards to the short sales a little more. Which might lead to more foreclosures. Asking the sellers to come to the table with more money before they accept the short sale. Money that many sellers don't have or won't pay, leaving the buyer to come up with the money if they really want the home. Before Chase would take a note for the money they wanted but it appears they are changing and demanding money before it can be released. It is indeed a crazy market.

This market is really a mind blowing situation and so many things to think about. I do think in theory it sounds really great but I just don't know.... what are your thoughts on how it really will effect the overall market?

Dianne...

I am writing a new post that will address many of the questions addressed by those that have commented on this post. Should have it done tonight or in the morning!

Thanks for a great comment.

If you take your idea and apply it to ALL home purchases, it would certainly stimulate middle to high-income buyers to make a purchase or build. For lower income buyers, the politicians could include a modest credit strictly for compromise and appeasement. While I don't entirely agree with providing an entitement, a compromise like this could accelerate the housing market.

Great, original idea!

Great post. I truly think that this proposal with attract more activty in outr Real Estate Market

Great Idea! Would certainly help reduce the fraud being discovered with the tax credit since you would have to put actual cash in the deal. Another idea I have had for a long time to ease the credit crunch and stimulate lending would be for the Fed to make the banks pay interest on excess reserves. Call it a hoarding tax if you will.

Richard -genius idea. Unfortunately the political mindset in this country will go ballistic over any plan that could benefit the rich. "Cut off our nose to spite our face".

Good idea that will be shut down by most democrats in congress because it will reduce tax income needed for their wasteful spending...

Richard, I think you started this blog in jest, but it has sparked a lot of interest. Why...because it makes since to us (with some modifications & limits) and about those who would scream a benefit for the rich...I say who cares, let the rich get richer as long as the middle class & poor have the opportunity for the same benefits. I love those rich people that create jobs for the rest of us! Thanks Richard, makes sense to me.

This idea reminds me of a previous 'stimulas' program that resulted in our streets being flooded with hummers paid for by taxpayers. This tax credit for downpayment idea would mean the taxpayer will pay for the homes of the rich who can pay cash! This is really good for real estate agents, but not so good for the taxpayer. Those who control the tax laws of this land will help themselves and the very very poor, but the middle class huddled masses....not a chance! I prefer the current credit plan extended to all homes and all buyers and up to combined $300,000 income. Yes, the result will distort real value, but the projection of real value in the next three years is really frightening.

Fabuluos idea. You win the Nobel Peace price for Real Estate. Love the plan, as long as the government keeps their nose out of it. Did you write your speech yet? ;))

way to clear cut and chock full of common sense.... congress could never go for it... just like the other simple ways to help fix our economy and create jobs thru small business... like cutting payroll taxes and not threatening to raise capitol gains...our government right now will not sanction anything that would be easy and work... they want control of our lives and are determined to get it!

I like the fact that this proposal encourages large down payments. However, at this point I am against any proposal that seeks to artificially prop up real estate and housing prices. The fact is that buyers will come back into the market when real estate prices are cheap again. We do not need home affordability programs that will only push up real estate prices to unsustainable levels. What we need is affordable real estate, which the market (without government intervention) is doing a great job giving us. We have to let go of what homes "were worth" and accept that they were never actually worth those prices. Accept it: it was a debt fueled asset bubble. Real estate prices will be sustainable when they are in line with incomes, not the ability to borrow absurd amounts of debt. The tulip bubble of 1637 shows us that we have learned little from history.

Richard,

Wonderful post!!! I think you have a basic idea that can be used as a springboard to more specifics. We do need to have more people who are buying a home with some "skin" in the game, but still allow them to have it deductible. Maybe have a "tiering tax rate" that allows them to use a tax rate that is higher than what they are in when they reach a certain percentage of down payment.

Keep up the postings....it will be interesting if this great idea gets "picked up"....

LOVE the idea... where do I sign?!!!!!?!?!

I am all for this. It should be capped at 20% of purchase price. Otherwise it could be a real steal for those paying all cash then renting them out and taking a depreciation.

LOVE it, would it be for first time home buyers or everyone? The other problems that need to be addressed, like the over regulating after the mess, and things like the HVCC need to GO AWAY!

Richard - Well, you certainly got things stirred up with this idea. I'm all for new ideas and getting outside the box. However, I guess I'll be going against most of the opinions here for two reasons. One, I agree with some other writers that a tax credit and tax deduction are basically the same thing...increasing expense or reducing revenue brings the same result. But the real issue I see here is that whatever is done should increase the real estate sales activity. How many people have the cash to put down on a house but need this incentive to take action?...I'm going to say not many. And worse, if they're doing it just to get the one-time tax reduction then will they be looking to sell it in the short term also, dumping more inventory on the market, particularly with another wave of foreclosures looming. My feeling is that the buyer's credit is there for those buyers at the lower end of the market (generally without the financial assets to make the big down-payment) and that is where the bulk of the activity has been recently. Without the lower end sales, the people up-sizing can't make their purchase, etc. Whatever the correct answer is, I truly believe that doing nothing is NOT the answer.

I'd buy a house every year and never pay taxes again. The transactions costs of a buy and sell each year would be far less than the taxes I would have paid.

Hey Richard:

I have to at least give you an "A" for effort for at least bringing some semblance of a plan to at least be considered. I'm also guessing that you don't have a degree from Harvard, a Doctorate or have worked for Goldman Sachs. Wow..it's amazing how just regular folks can at least have an idea! :)

Anyway, I also like the idea of folks having a little more skin in the game....However, I'm not sure that the plan would be a totally effective way to effective stimulate the economy and the housing market. Not to mention the cost of implementation.

Additionally, affluent folks (who yes are also tax payers too), need less of an incentive to buy. Further, their would undoubtably be a good deal of political fallout from having the poor and middle-income folks paying for more wealthier individuals who already have the means to purchase.

I have to agree with a few of the rainers that commented in on opening up the tax credit to anyone buying a home, not just first time home-buyers. By the way, we have Senators from our State co-sponsoring that Bill right now!

James ...

In a true market world I world agree, but the Keynesians have already upset the market forces to the point that a natural recovery would take so long as to be catastrophic.

Our area never had artificially high prices, but we are suffering the same fate as area where people paid 4 times the amount for the same house.

I'll elaborate on my next post.

An excellent idea! Sounds good to me.

It is a shame that with so many great ideas and talented people, and the fact that it would only actually take an afternoon to come up with a solid plan to put real estate on the road to recovery. Look at the great ideas in this post alone, but therein also lies the problem, they are based on good old fashion common sense.

If it makes sense our government wants nothing to do with it. Instead they would rather give away billions for a Cash for Clunkers program. This was an absolute joke. This is money that evaporated the minute the vehicle was purchased and had no lasting benefit whatsoever. God forbid we spend money in a way that might actually do some good.

I think there are many ways to create incentives for purchasing Real Estate that would be better than the first time tax credit and the ideas on this post are proof of that. This would be something that would create value if structured properly and actually put the economy on the road to recovery.

While I believe the deduction for the down payment has a lot of merit, I also believe after the dust settles there are going to be many responsible people that have lost the ability to come up with a down payment due to market losses, living off of savings, etc. These people will eventually get back on their feet and should not be ignored, especially when their hardship was through no fault of their own.

There should also be low down payment programs as well as the incentives for large down payments.

Again if structured properly and responsibly we could find a way to make this work to every body's benefit. As a taxpayer I would much rather subsidize a down payment on a solid, correctly valued piece of real estate, than I would a Clunker program or a wine tasting study or any one of another 1000 pork projects our ELECTED Representatives have come up with.

Until we get rid of the incompetence in Washington, we are going to be swimming upstream, I am not saying it can't be done, but it is always easier flowing with the current than against it. We need to all remember this in the next election.

I think it's a great idea; anytime we can help people reduce their tax debit and at the same time encourage them to spend their money to stimulate the economy, you have a win-win situation. I agree with most of the other comments herein and while this alone would probably not bring back the housing market, it certainly would be one step towards that direction. As far as the tax payer credit, I think it has been a nice tool for us to use with first time homebuyers to get them to buy and they in turn use that money to buy appliances, put in new landscaping and other things that stimulate the economy. I also heard it has cost our government (us) x-amount of billions of dollars. So while it would be nice to keep it, I think taking it away will not hurt as much as if we make it harder for people to buy a home. Lenders are getting stricter with their guidelines and even people with decent incomes and great credit are having a hard time securing a loan for the home of their dreams. I heard that the lowest delinquency rate on loans is with VA loans, which provide 100% financing and no PMI. Some people will say that's because veterans, in general, are accountable, upstanding individuals. So overall, anything we can do to provide incentives for people to buy is worth a look!

I love the idea! Now then, the challenge is not so much on the low end of the market, but on the high end, where people are currently stuck paying alternative minimum tax. Unless you could cut through that, the top end is still going to be stymied.

The AMT lovers would whine and claim this is just another way to give the rich another good tax break... nay, it would encourage them to go buy more McMansions.

I would predict that such a change would in fact shoot real estate back to the heights of the last bubble. Not that it would necessarily create a bubble (unless there were a sunset on the deduction).

If a tax credit is retained, I would like to see it be a percentage of the purchase price (with caps, of course) rather than a flat $8000. Homes prices vary from region to region--it seems the tax credit should also.

The premise which most of the posts seem to to promote is the US tax code doesn't do enough to promote homeownership and that MORE is needed. In fact, our current code, not withstanding the short-term FTHB tax credit, is already heavily tilted toward encouraging renters to become owners. Zero capital gain after two years, tax deductibility of interest and property taxes, deductibility for certain closing costs. I'm pretty sure that an objective look leads one to see that the government heavily supports housing (and consequently our livelihoods) with all the advantages currently built into the tax code.

The problem, which too few comment on, is that in certain parts of our country affordability remains an issue because of the disconnect between incomes and home prices. The bottom line is home prices had risen too far in certain parts of the country to sustain a healthy market which in the long run can ONLY be supported by income gains (not speculation). The mortgage industry certainly threw fuel on the fire with the proliferation of poorly thought out loan products designed to allow Buyers to overcome this disconnect between incomes and values (pay-option ARMS particularly come to mind).

The sad and unavoidable consequence of all this is that values had to adjust downwardly in the short-term to realign with incomes. The good news I see (based on lots of comments I read on these boards) is that demand is reappearing in a very strong fashion precisely in markets that have been hardest hit. At this juncture, I personally would like to see the FTHB credit go away and allow markets to reach equilibrium on their own without the government trying to vainly prop up the RE market in the vain hope of forestalling what is in the long run a proper adjustment of values to incomes.

Richard,

Almost wish i had not read this, but I love the idea!! It just makes to much sense for the greedy idiots we elect to consider it. Might I suggest we all sned this to our congressfolk and pray that one of them takes credit for the idea and runs with it Great post!

Talk about stirring the pot... in a good way of course. Great discussion you've got going here Richard. I wasn't thrilled with the tax credit, but this a great alternative. The only challenge I see with this... once those folks on the Hill get to the 'revenue reduction' portion of the plan, they will balk. We all know how much they love spending other peoples money. :)

Richard,

Your idea is worthy of consideration. The tax credit has worked as evidenced by September's 9.4% increase in existing home sales. November's numbers should benefit as well. The recent increased activity has also removed some excess inventory and may have helped stabilize home prices.

I believe we still need some type of intervention until the economic fundamentals get stronger. Employment uncertainty, tighter and possibly more expensive credit, and declining home prices do not encourage buying activity.

These are certainly not normal times. There have been vast changes in our country's financial situation. Together we are finding our way through the new economic reality. We need some action, the right action. Things will not go back to the way they were anytime soon, if ever.

Great idea - now sell it to our lawmakers.

Because this post was featured in the daily email and I thought the Title was interesting, I stopped by to read the post. As I read thru 173 posts I was surprised to only find 8 posts that I felt disagree with the proposal. Make this #9 that disagree. I support the elimination of the 8,000 credit. While at the same time agreeing with some of the posters that if renewed it should be the greater of the downpayment or a fixed maximum amount. With the tightening loan criteria I see the current stimulus as PAYING PEOPLE TO (that can afford to buy) BUY HOMES. Your proposal continues to do just that and in larger amounts.

Here is my list of people that disagreed with the principle. #25 #56 #63 #107 #108 #116(Possibly the best) #118 152

I ask everyone that supports this proposal if they support higher taxes and if they support this proposal because they would benefit with more income from sales. People need to ask what is the best for everyone not just themselves.

Great post and great idea! People are motivated by incentives, even if it's only a perceived incentive. Can't wait for your recap. As much as I would love to read this entire post and comments, I was only able to glance through as I've got to get some work done tonight LOL! But I hope to be able to come back to it as I can tell there are many great contributions. Thanks for starting!

I am not a supporter of anything that will artificially give people more money. I am in support of efforts to reward people who make good fiscal decisions.

I am curious about this concept Richard.

But I too have a reservation about encouraging buyers to put all their eggs in the home basket. As a lender my greatest concern is buyers who have too little in reserves to weather a storm. We have a significantly un-der-educated public when it comes to money.

I think the $8000 credit has pulled sales forward, somewhat akin to the "Cash for Clunkers" program, which hasn't yet played out as well.

I also have a reservation about the ending of the $8000 credit program and the overhang of current listings and the onslaught of foreclosures and short sales predicted for the near term future.

So I'm not 100% behind the down-payment deduction, but I'm not dead-set against it either.

Put me solidly in the "intrigued by the idea" column.

That certainly would boost all home sales. But politically it's a non-starter.

I see the potential for the very wealthy to take advantage abuse this idea.

Wealthy Person A already owns home B free & clear. They sell the home to their corporation for $5,000,000 and the corporation gets the tax deduction.

Alternatively: the home is currently owned by the corporation which is owned by the wealthy person. The corporation sells the home to the wealthy person who then gets a $5,000,000 tax deduction for the year.

There could also be 1031 type exchanges set up so the wealthy buy each other's properties and get the tax deduction.

It does sound great for the Real Estate Agents though!

It can also make a lot of money for mortgage brokers doing refinance and HELOC's.

I pay enough of a down payment to negate all income taxes for the year on a $1,000,000 home. (Say for example $500,000), then the day after closing, I go get a HELOC or refinance to get my cash back out.

Definitely a creative approcah, but the chances of fraud and abuse are still there.

I would think that a $15,000 tax credit for all home buyers, primary home or not would help the market. I however, would like the credit to be taken over 5 years or until the home is sold, whicherver comes first.

That keeps unqualified people from using the credit as their sole downpayment (in many cases), which is better for the market overall.

Just my 2 cents!

I don't see that at all. First of all, the deduction is only available on personal returns. Corporations would not be eligible because as stated it has to be your personal residence.

The deduction would be treated as any other deduction for depreciation, subtracted from the cost or other basis.

So if buyer buys a million dollar house, takes a million dollar deduction (not a credit) then the cost basis would be zero.

So taxes would be paid on the gain in excess of the one time personal exemption.

I'm not sure that I agree that every home buyer should get a credit??? That makes little sense to me because it does not address the issue of negative equity which is what this post was all about.

BTW....

The 1031 exchange is only a tax deferment, because in theory the taxpayer has no liability for only changing the investment vehicle in like-kind.

Should you pay income tax if you take money out of one bank and deposit it in another?

Richard, By golly you could be on to something here. I love your "outside of the box" thinking. The box being first time buyers only. There could be some merit to your idea. I can't wait to see your next post on this subject.

Richard,

Sounds like this could be an interesting alternative to the tax credit.

Ann

It sounds like a wonderful idea and almost everyone is on for it. I am not sure what effect it would have on the total economy and if we can afford it. Worth some research.

OCT

I'm glad you're thinking creatively, but am I the only one who thinks it's not the government's job to stimulate any market? Haven't we learned that when the government intrudes into a market all stability is gone and booms and busts become the norm? Do we want prices to go up so much that we'll exchange a free market for a government driven real estate market?

Interesting thinking Richard. I will think about it for a while. Don't think that it is a bad idea. There are people who might invest in a house that are now keeping things liquid that might take the plunge.

Richard, you are my pick to replace Tim (tax cheat) Geidner. Brilliant idea.

LOVE THIS IDEA! Very creative thinking and it would work in the real world.

The tax credit deserves to die. Your idea is great except for one thing and that is the main reason for the current program. It does not pander to obama's voter base. Nothing will be done that does not fit the obama agenda. Al programs that do pander to his base go in effect immediately. Those designed to have a huge negative effect on the economy like obama-care and 'cap & trade' go into effect afrter 2013.

Richard! What a great idea! A couple of weeks ago I blogged challenging our members to come up with solutions to the housing market debacle and I believe you've moved to the front of the class!

Wall Street has offered tax-advantaged investments for decades, why not the real estate market? Or, the Congress could pass legislation making a self-directed IRA and its tax advantages applicable to the purchase of a single-family home. Of course we have the lucrative mortgage deduction in place but a little stimulus to get investors and high-end buyers back to the market might be good.

I'd encourage you to NOT let this idea die on the vine! Please contact your local Congressman/woman and propose he/she introduce legislation as you've proposed. NAR should also be interested in this idea. And yes, you'll get oppostion from some folks, but it's a great idea.

Good luck and GREAT thinking!

Richard,

A correction to my previous response. A self-directed IRA is already applicable to a single-family home, what I MEANT to say is primary residence or property that will be used by the owner of the IRA such as owning your own business property, office building, whatever.

Genius...pure Genius!!! Sometimes the simplest ideas are the greatest and most often overlooked.

I'm all for doing whatever it takes to get this market moving back in a positve direction. A little help is better than no help at all. Good thoughts.

Love it! You are so right about the higher end market still suffering as much as before the tax credit. This would also give potential buyers a concrete understanding of how it works...so simple.

Very interesting idea. I'll wait for the next post to see the details and the objections that some of these people have raised. I have many of the same issues and arguements that they did.

Richard,

What your proposal does is not only extend the government's 1st time buyer tax credit, but open it up to everyone and remove the $8,000 limit. Here's what I came up with for a hypothetical $200K home purchaser who puts 20% down and has an annual taxable income of $100K:

Tax liability on $100K: $17,375

Tax liability on $60K: $8,165

Tax break/Cost to Joe Taxpayer: $9,210

Based on calculations from this website: http://www.moneychimp.com/features/tax_brackets.htm

I'm not sure what a cost/benefit analysis might reveal or how that might be tempered by placing limits on the deductions (which analysis itself might be quite interesting to see what results are achieved by varying the amounts and considering the impact on investment, downpayment decisions, etc.). The mathemeticians might be able to give those answers, but it's above my pay grade...

Interesting idea but with no political motivation there's zero chance it'll happen.

Great Idea! It's simple and straighforward. No complicated, convoluted tax code needed.

Richard I think the tax credit needs to go bye bye.I had a listing sell recently where the seller took advantage of the credit...but I'll bet they would have bought it anyway.

We need to get back to a true market, now I'm off to read your featured post.

Your idea has my vote, Richard!

I like it! Maybe people would actually start saving money for down payments. Larger down payments = more affordable monthly payment = less foreclosures/people losing their homes.

OCT

I think if a buyer cannot afford to buy a home at these low prices and low interest rates - they are just not ready to make the purchase. I say no more government hand outs. Everyone including companies need to learn to live within their means and save up money for the hard times. Old fashion but solid.

Yes Richard. This sounds more reasonable than the $8,000 tax credit. However, everthing has a price tag. It is time for the market to self correct. This correction in prices (downward) should be incentive enough for any buyer at any price range.

Richard...Thanks for you idea and energy. The Tax Credit favoring first time buyers only was a weak gesture, it should have been extended to all Buyers. Your plan, may give Congress the opportunity to distroy the deductibility of mortgage interest, that may be a consequence worth accepting. In so far as more than 46% of the population pay no income tax at all, the impact on the high end purchases may work, big time. Good thought! Now let's keep Barney Frank away from your idea, he'd kill it for sure.

Great idea, getting it implemented is something else.

I like this idea for a primary home, with a limit with not quite a dollar for dollar deduction after a certain high cap. I say forward this to NAR and others as another idea. I haven't thought much about what this means to the almighty government tax dollar but it does stop taking "credit" money directly out the pockets. Interesting idea to really ponder.

Only way I would be for something like this is if it was for a buyer who was actually going to live in this home. Investors with cash are taking away opportunities in our area from buyers who can not out bid them

I'm not sure, it makes sense so the politicians will never go for it. Make it complicated and stupid - then you've got a winner in Washington!

Certainly sounds like something to think about. Great idea to have more people with equity! Just wonder if there shouldn't be a limit to the amount they could deduct. And how would this effect taxes in the short term and long term? Always have to think about Doctrine of Unforseen Consequences.

I think that is a GREAT idea! It would stimulate the economy and give the buyer incentive to buy a home.

I think that would be a GREAT idea! What better way to stimulate the economy? Buyers would get something tangible for their investment.

Judging from all the comments, it would seem that you managed to strike a nerve with this one Richard.

OCT

Richard, i like this idea. I believe the tax credit should expire. I am not sure how it would work if the seller brings the closing money to the table.

Cheers,

Derrick Allison

da@midohio.twcbc.com

Very interesting. It's good to see someone thinking outside the box. Now, can you get big brother to get on board.

well intentioned, but we've had FAR too much intervention already. as you can see from the responses, it seems like a good idea but the efforts to limit it or change it are evident even in this first blush effort. that's the reality of anything that comes from DC...it typically starts with a good intention, but soon morphs to a frankensteins monster and the end result is nothing short of disaster as the unintended consequences become clear.

to continue to distort market forces is simply to invite the compunding of prior attempts to get people to do what they will not do without a subsidy. if you have to pay someone to do something...it's a bad idea.

we've seen the market return to levels that are affordable by most families and a return to underwriting. the suggestion that we must do something to get away from that is just looking for the next unnatural bubble. those with less than five years in the business can be excused for not understanding that stated income loans FOR ANYONE WHO ASKED FOR ONE were a recent development...and you can be excused for not understanding that homes sold well without a tax credit. everyone else should take a step back and ask if the continued, or expanded, intervention of the government in our trade, OR ANY OTHER TRADE (HEALTHCARE?), is really what we want.

if we learned anything from the current bubble it should be that homes are homes first and investments second. to induce people to buy for reasons other than shelter is simply returning to the "home as an ATM" mentality that has visited massive and possibly irreversible harm on our economy. to encourage purchases that are unaffordable otherwise is very bad policy. a tax deduction is simply a twist on a credit...either way the taxpayer foots the bill and we pay for it. no thank you.

Dear Washington DC, we've seen what happens when you try to "help". you guys could screw up a trainwreck, do us all a favor and stop helping.

OCT

What a great idea, this would stimulate several industries, not just real estate. Sellers wouldn't have to pay taxes on the proceeds from their home enabling them to spend money on whatever they like. I like it a lot!

NOV

Richard, An excellent idea- allow buyers to take the deduction off their income taxes. Wouldn't it be nice if we could actually simplify the process.

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Richard Weisser - Coweta Fayette Real Estate - Newnan homes for sale

Newnan, GA

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Richard Weisser Coweta Fayette Real Estate

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