You Gotta Know When to Fold'Em: The First-Time Homebuyer Tax Credit & You

By
Real Estate Agent with Realty Executives

GENTLEMEN, START YOUR ENGINES!

Are they good and fired up?

Great, now turn them off.

As one knocks around the internet here in late April of 2010, he or she cannot go two clicks without encountering manic encouragement to purchase a home “BEFORE IT’S TOO LATE,” or proclamations that “TIME IS RUNNING OUT” to take advantage of the first-time and move-up homebuyer tax credit; each froth-inducing pitch more fevered than the last.  The only thing missing are the decrees that “THIS OFFER EXPIRES AS SOON AS YOU LEAVE THE PREMISES,” and inquisitions as to “WHAT DO I HAVE TO DO TO GET YOU INTO A HOUSE TODAY?”  P.T. Barnum had nothing on a gaggle of motivated Real Estate agents.

Here’s the thing, though, I am not a big fan of leveraging fear as a sales tool.  With just over a week left in the Federal Clearing House Tax Sweepstakes, I am pulling the plug on my own hyperbole.  If you are a first-time homebuyer and have not found a suitable home after months of feckless searching, it’s time to call off the dogs. 

“IT DOESN’T HAVE TO BE PERFECT, JUST BUY SOMETHING!!!”


“HAVEN‘T BOUGHT A HOUSE YET???  WHAT ARE YOU WAITING FOR???”

“DON’T GET LEFT ON THE SIDELINES! THERE’S STILL TIME!”

Lest your home buying ship wash up on the nearest reef, these bleating calls to action should go unheeded.  The wall to wall promotion does have one thing right, though:  the time is now.  Just not in the way they would have you believe.  Now is the time to regroup and ensure you do not make a poor purchasing decision.  The tax credit has been a nice perk to those fortunate enough to find the right home over the past year, but don’t sabotage a 250k purchase because Uncle Sam is holding an 8k caliber gun to your head. 

If you are just starting the hunt now, you’ll do yourself a huge disservice by attempting to shoehorn yourselves into an ill-fitting home due to the time constraint.  If you are nearing your wits end after an unsuccessful months-long odyssey, you are equally likely to do the same when facing down the looming deadline.  I am issuing a cease and desist order to those who have confused the priorities of their fledgling home purchases. 

Let it go, folks.  Let it go. 

We can start again when your only underlying concern is securing the best possible deal on your ideal new home.  With the throng of desperate lemmings running blindly for the cliff, you might just find yourself as king of the buyer’s mountain come May 1st.  With a potential reduction in the number of suitors left after the great tax credit hari-kari, you could unwittingly stumble upon higher negotiating ground via your abstinence from the purchasing frenzy.  While that 8k incentive will drive some to overbid on properties in the coming days, the smart buyer might seek to carve a larger swath out of a seller’s backside in the fertile post-April 30th hunting grounds.

“IF YOU DON’T LIKE THIS HOUSE, SEND IT BACK FOR A NO-HASSLE MONEY BACK GUARANTEE!" <or not>

The folly in the air is palpable at present.  That little governmental spiff will come and go, and you won't even remember towards what end the money went.  You'll be stuck with the house, however.  Make sure it is the one you want. And for God's sakes, man, don't make the same mistake that we all made back in the heyday of 2005-2006 by assuming you will be able to offload the house in a couple of years if it doesn't prove suitable for your needs. 

Surely we haven't forgotten this lesson while it is still being taught in excruciating detail?

 

Comments (26)

Susan Mangigian
RE/MAX Preferred, West Chester, PA, RS152252A - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

Paul, well written and so true, as usual!  I have a few first time buyers that, with your permission, I'd like to send a link to.  

Apr 20, 2010 12:30 PM
Paul Slaybaugh
Realty Executives - Scottsdale, AZ
Scottsdale, AZ Real Estate

As if you have to ask, Susan.  Link away.  You always have carte blanche with my content. :)

Apr 20, 2010 12:41 PM
Cameron Wilson
Labrum Real Estate - Murrieta, CA
The Short Guy - Murrieta,Temecula,Menifee Californ

Most of my buyer clients have not been in a rush to get the $8000 bucks they just want a house that fits their needs at a good price.

There is a new home builder advertising on the radio out here bigtime pushing the urgency for people to come on down and buy now. Honey get in the car we have a house to go buy.

Apr 20, 2010 01:23 PM
Paul Slaybaugh
Realty Executives - Scottsdale, AZ
Scottsdale, AZ Real Estate

Can't say that I really blame the builders for that tactic, though, Cam.  Like a listing agent, they are selling a product, not a service.  A sales pitch is part of the drill.  It's the last minute come-ons from agents seeking to represent the buyers they would throw on the fast track to a purchase out of fear of missing the tax credit boat that gall me in particular.  Hard to represent the best interests of those you would pressure to buy in an unrealistic timeframe. 

Apr 20, 2010 02:13 PM
Jason Crouch
Austin Texas Homes, LLC - Austin, TX
Broker - Austin Texas Real Estate (512-796-7653)

I have clients that I discussed this topic with just yesterday.  They were wondering if the market would re-tank after April 30th.  I posit that it will not, and here's why:

If you were not in the market for a home, and I offered you $6,500 to move to a new place, or $8,000 to buy rather than rent, would it really make you do something that you weren't already considering?  I doubt it.  Maybe if I offered you FIFTY thousand dollars, it would get people off the bench who had zero interest before that point.  At any rate, I think the vast and overwhelming majority people who are in the market right now will still be in the market next month if they don't find the right place before the deadline.

Apr 20, 2010 04:02 PM
Robin Dampier REALTOR®
Coldwell Banker King - Hendersonville, NC
Hendersonville & Western NC Real Estate Source

We're closing with a buyer on Thursday who thought they might qualify for the tax credit.  But alas, they only lived in their last 2 homes for 4 years each!  Drat, missed the credit by lacking at least 5 years in one of the previous homes.

Sue of Robin and Sue

Apr 20, 2010 04:12 PM
Paul Slaybaugh
Realty Executives - Scottsdale, AZ
Scottsdale, AZ Real Estate

I concur for the most part.  The market will not tank.  I do think that there will be less competition for homes on May 1st than there is right now, however.  Possibly a little more leverage to squeeze a slightly better deal out of a seller.  It may not be instantaneous (there will be a feeling out process from both sides of the table), but I expect the sense of urgency to dissipate considerably.  We might not even lose too many buyers out of the market once the credit is gone, but I have a feeling there will be more tire kicking than we have experienced these past few months.  Lots of looking, but less contract writing.  Sellers will need to be creative to re-energize the buyers in their respective markets.  Post-tax credit seller concessions, perhaps? 

Apr 20, 2010 04:13 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

There are some buyers motivated by this too some extent and think it would be nice to get the credit, but given our median price, it really doesn't make a huge difference in the long run.

Apr 20, 2010 04:48 PM
Lydia Puller, Realtor
Vanguard Properties - San Francisco, CA
Homes for Sale in San Francisco, Marin & East Bay


Great post! So true. I had to chuckle when you said "Federal Clearing House Tax Sweepstakes."  I always counsel my buyers to make the right decision, take their time and not to be pressured by their mother, their uncle, the neighbor, their sister, the Jones' or the tax credit.

Apr 20, 2010 05:10 PM
Connie Johns
Transaction Realty - Toledo, OH
Toledo, Ohio Area Real Estate

So true, when the tax credit evaporates... People will still be moving. Families will still be growing or kids will be moving out, jobs will still be sending folks to another locale, health reasons will require a warmer dryer climate or no stairways.  Life will go on...thanks for putting it in perspective.

Apr 20, 2010 05:53 PM
Pam Turner, REALTOR®, e-PRO®, SFR
Century 21 Belk Realtors Dalton GA - Dalton, GA

I don't think it's made a huge difference in my area either, people are holding back due to the unemployment rate locally.

Apr 20, 2010 11:47 PM
Anonymous
Sabrina Linman

I believe that the tax credit has been a tool and an opportunity for all of us. In fact it is still available until April 2011 for members of the military that were deployed for 90 days between April 2008 and April 2010. REALLY!!

I don't think that buyers should be encouraged to buy something that doesn't fit their needs but if they were thinking of buying and desire the privilege of home ownership why wouldn't they buy now and receive the tax credit. For some buyers $8000 is 1/4 of their yearly gross income - and that folks is  A LOT of money!

In my area we have been affected by the loss of USDA loans and I believe that we will also be affected when the tax credit ends. Yes people will still be moving and families will continue to grow but the little bit of help they were receiving, and Lord knows we could all use a little bit of help right now,  will be all but dried up.

For now I believe we need to switch our focus onto other products that can help buyers achieve their dream of home ownership. If you haven't heard of the FHA203K rehab loan your missing the latest and greatest boat - buy a home and at the same time borrower the funds to remodel and update the home. Great Loan and an awesome opportunity for homeowners.

I plan to continue to offer opportunities to home buyers and owners as they arise - I hope that all of you will too!

 

Apr 21, 2010 02:07 AM
#17
Cheryl Ritchie
RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD
Southern Maryland 301-980-7566

I like the use caution lesson in your post. Why "be in such a hurry to put out the fire that you forget to turn the hose on" is what my first Broker used to tell us.

Apr 21, 2010 07:37 AM
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

The buyers I am seeing in the market would like the tax credit but their decision is not based on it.

Apr 21, 2010 10:30 AM
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

"Here's the thing, though, I am not a big fan of leveraging fear as a sales tool."  Don't go into Politics, amigo.   God forbid you help change the game.

It seems that it is the tailor made tool of the masses and works wonders with the culture as we know it ... or grow it, for that matter.

In not so quiet moments of desperation, I'm sure I've used it myself.  That written, the advice above is wise.  If you want motivation, seek your own.  There's little sense in being an unfortunate son.

Apr 21, 2010 03:37 PM
Paul Slaybaugh
Realty Executives - Scottsdale, AZ
Scottsdale, AZ Real Estate

Sardiman, as a salesman, it's almost blasphemous to eschew the fear merchant business.  Fear of loss is probably the single greatest motivator for purchasing.  While a technique one can employ to move product, I don't see how you gain trust with those you would represent by running a mind game on them.  Never understood and, and never will. 

Apr 22, 2010 04:24 AM
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Hi Paul...If I was not too tired to wave my magic wand, I would have bestowed your wisdom on everyone.  Hopefully they will read this and think twice about pressuring their buyers to make a hasty decision.

Kate

 

Apr 23, 2010 04:26 PM
Erik Hitzelberger
RE/MAX Alliance - Louisville REALTOR-Luxury Homes - Louisville, KY
Louisville - Middletown Real Estate

The real losers here are going to be the procrastinating sellers.  Not that I expect the market to tank.  But, placing a well-kept home on the market right now is like tossing a fresh carcass to a school of famished piranha.  Once the frenzy dies down, the fish will still bite, but it will be a much more systematic process.  On the bright side, this is a big step towards a return to some normalcy.

Apr 25, 2010 03:38 PM
Paul Slaybaugh
Realty Executives - Scottsdale, AZ
Scottsdale, AZ Real Estate

Good to see you, Eric.  Moby sends his wayward regards. ;)

Apr 25, 2010 04:40 PM
Erik Hitzelberger
RE/MAX Alliance - Louisville REALTOR-Luxury Homes - Louisville, KY
Louisville - Middletown Real Estate

Inna made me sign in.  After that I figured I'd come over here and see if there was some tale I could read half of.  After some thought, I decided not to chance scrolling back through recent posts.  Hope all is well.

Apr 26, 2010 02:34 PM