Pigs get fat, hogs get slaughtered!

By
Mortgage and Lending with Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. LMB100023827. NMLS257576.

I'm sure we've all heard that expression. But there isn't a better time to recognize the impact of that saying than right NOW!

The clock is ticking on the home buyer credit, yet it amazes me how many buyers and sellers are still letting a few thousand dollars keep them from getting a contract signed!

I read a recent blog by my AR friend, Jane Peters, written on the subject of buyers nickel and diming the sellers to death. Over a $5000 roof (a roof, I might add, that wasn't expected to cause inspection or appraisal issues, by the way).

Now let's think about this: a $5,000 roof or the $8,000 first time home buyer tax credit??

Simple math points out that if the buyers make the offer with the roof as is (remember, no inspection or appraisal issues are expected) and the sellers accept it before the end of the month, the buyer is $3,000 to the good anyway.

But to take this one step further: let's say they continue to hold off hoping to get the seller down another $5,000, all for a roof that doesn't need to be replaced currently anyway, only to miss the contract deadline date and lose out on the $8,000 credit, they will pay for that mistake for over 25 years!home buyer tax credit

Here's how I figured that:

The monthly "savings" on a $5,000 lower price/lower loan amount is about $27 per month. If they mess around and don't come to terms on the contract by month end, they lose the $8,000 tax credit. If I divide the $8000 they stand to lose by the monthly "savings" they are hoping to gain of $27, the break even is over 296 months, or over 25 years!

And that's just simple math without taking other tax or financial factors into consideration like the value of current money (the $8k tax credit) vs borrowed money.

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Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Fairway Independent Mortgage.

Ruth Vogt Colorado Mortgage Lender Ruth Vogt, Sales Manager

 #LMB100023827, NMLSR# 257576

 Equal Housing Opportunity. 

 Regulated by the Division of Real Estate.

   www.ColoradoHomeLender.com

   ruthv@fairwaymc.com  303-881-7849.

 

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Comments (95)

Steve Sandoval
Hacienda Heights, CA

I can not wait to return to a more normal market even with all the REO's, tired of seeing people rush to overpay for a $8,000 check. Each market is different, I'm in Los Angeles, and we will be taking a further 10% hit because of this "Credit Incentive" induced second bubble. To know where you're going, look back where you've been, remember history.

Apr 26, 2010 04:03 PM
Dawn A Fabiszak
Private Label Realty ( Denver metro area, Colorado - Aurora, CO
The Dawn of a New Real Estate Experience!

Congrats on the feature, Ruth!  Some nice comments as well.  Just a few more days for the tax credit.

Apr 26, 2010 04:17 PM
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

Ruth,
crossing the fingers that they will do something soon to extend it ! :) it will be awesome to have more movement like this, great blog !

 

Apr 26, 2010 04:40 PM
Eugene Adan
Adan Properties, Carlsbad, CA (760) 720-9710 - Carlsbad, CA
Carlsbad Real Estate

Ruth,

I can't understand people.  Why they will do one thing and oppose you on another.  All we can do is advise.  I just hate it when they use you as a "goat" for their ignorance.  Can't be avoided!

Apr 26, 2010 05:47 PM
Anonymous
Gloria Marina

You are SO RIGHT! I am presently dealing with a similar issue with a first time homebuyer -- not mine, thankfully or I would strangle -- over homeowner insurance. We are talking here $1200 per year. Which by the way the buyer has to pay anyway. So not only does he risk loosing the $8000 but add roughly $1200 more. Obviously he cannot do math.

Apr 27, 2010 01:54 AM
#83
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
Truth, Excellence and a Good Deal

The $8000 tax credit is no reason not to negotiate to the fullest extent possible.  From what I'm seeing in these comments, it looks like this credit is causing a little bubble in prices and terms.  Everyone is relying on the credit to give them a backstop instead of negotiating normally and getting an extra $8000 prize. 

Apr 27, 2010 07:17 AM
George Wilson
Lincolnton, NC - Lincolnton, NC

Loved your breakdown. It still amazes me that buyers & sellers would continue to haggle over +/- $1000. My mentor once told me that it was an idiot that haggles over a measly $$ when the home is worth more than the amount being haggled over in the long run.

Apr 27, 2010 07:25 AM
Chris Alston
Chris Alston (Keller Williams Realty, Silicon Valley, California) - Campbell, CA
Silicon Valley, California

So true!  So many think they know what they are doing, but then end up shooting themselves in the foot!

Apr 27, 2010 07:55 AM
Doug Patterson
Park Place Real Estate, Broker-In-Charge - Winston-Salem, NC
CRS, ABR, Broker-In-Charge

Very nicely put!   I've reblogged....

Apr 27, 2010 08:43 AM
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

You tell em Ruth.  Let's just forget the larger issues arguing over the smaller ones.  Ones that don't need to be replaced right now BTW.

Apr 27, 2010 11:39 AM
Ron Parise
LocateHomes.com - Cape Coral, FL

When I worked as a stockbroker we had a saying : bulls and bears get rich, pigs get slaughtered. My question after reading your post, is Who is the pig?

You start your post with the comment " it amazes me how many buyers and sellers are still letting a few thousand dollars keep them from getting a contract signed!"  But in the rest of the post it's only the buyer that you criticize. The seller is also refusing to budge. It seems to me that they are equally pig-ish  Jenna Dixon in comment 31 has it right. 

 

 

Apr 27, 2010 04:19 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

This makes so much sense.  And, I like the fact that you've broken down the math so simply.

Apr 27, 2010 04:50 PM
Bill Buettner
Keller Williams Greater Columbus - New Albany, OH
Your Real Estate Connection

some people will always let a nickel stand in the way of a dollar. don't ask me why.....

Apr 28, 2010 01:07 AM
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

Ruth, sometimes people defy logic.  I guess it it the old "Penny Wise and Pound Foolish".

Apr 28, 2010 01:15 AM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Drew, A true art, indeed!

Sharon, Agreed... when you can bring them back to the "now", the value of "today", you have a shot at some sort of reasoning.

 

May 03, 2010 02:48 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Steve, NOt sure we'll even recognize a "normal" market anymore???

Dawn, Going, going, gone!

Thanks, Ray, for the congrats... and for stopping by.

 

May 03, 2010 02:52 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Eugene, You're right... sooner or later.

Gloria, Sometimes even calculators don't help.

Tim, "Little" bubble? How do you measure a bubble? I know I'd be thankful if my property values only lost $8k recently!

George, Smart mentor you had.

May 03, 2010 02:59 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Chris, And most don't even know how really inflected the pain, do they?

Doug, thanks for the reblog.

Lyn, EXACTLY!

Ron, Funny that in my pig story the pig got fat; in yours it got slaughtered! And yes, Jenna did hit it on the head.

Christine, Glad the math breakdown was easy to understand.

May 03, 2010 03:05 PM
Ruth Vogt
Fairway Independent Mortgage, LLS. Equal Housing Opportunity. Regulated by the Division of Real Estate. - Colorado Springs, CO
719-592-0855 Apply 24/7 www.ColoradoHomeLender.com

Bill, Sad but true.

Damon, I guess that's what keeps this business interesting???

May 03, 2010 03:07 PM
Tim Duvall
Area Manager at Guaranteed Rate, Inc - Colorado Springs, CO

Great point Ruth.  I'm sure we will all be watching the Real Estate market closely over the next few months now that the tax credit is gone.  We are getting a nice boost on the affordability of home purchases currently with the unexpectedly low interest rates we're currently seeing, so that's a bonus!

May 21, 2010 06:15 AM

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