$15000 Homebuyer credit

[JakeRodgers]

Does anyone know if this provision remained in the stimulus package? I heard something about it last week, but don't know if it was finally included. If it was, does anyone have any creative ideas about how investors could utilize this credit? (I understand its only for first time homebuyers.)

[investorman]

I don't know if it's in the finally version of the stimulus package

Not sure how it could be used for investors if it is for first time home buyers. Only thing I could think of is if it could be used towards a multifamily Owner Occupied property (2-4units) . I would think that would be ok. Also last I heard it is the less of 15,000 or 10%. So if you bought something for $100,000 , it would be a $10,000 credit.

[Mr Investor]

I heard it got rejected.

[phlemboy]

The last thing I read in the Washington Post about an hour ago was that it was reduced to $8000 for homebuyers. It didn't specify whether it was for 1st buyers or not.

[henryinma]

This keep changing, different media outlets are reporting different things. Currently they're saying it's going to be $8,000 for first time homebuyers. Some say that it doesn't need to be paid back, others don't mention it.

Not sure how you think any investor can take advantage of it unless they're also first time homebuyers. I believe they do have to live in the property for at least two to three years. That number seems to change also. Then I suppose you could rent out the property after that.

[John_in_NC]

I'm one of the few in the real estate industry that hopes it will be shot down. I am sitting on the sidelines with cash watching the bank REO's pile up. The last thing I want is more competition. Get your cash and lines of credit ready if you got the balls. I think it's getting close.


John

[investorman]

The low prices of homes should be incentive enough...I don't think we should be using tax payer money so that people can buy a home.

The credit is kind of useless in places where property hasn't really fallen.

[christopher w]

it was dropped from $15000 to $8000, and it went fromanywho who bought a home to only first time home buyers.

How is the credit useless where property values have not fallen? Having someone give you $8000 for doing something you dream about anyway sounds like a great deal to me.

[investorman]

Well , it would be useless from government/tax payer standpoint because the entire point of the credit is obviously to raise prices. So if someone uses it to buy in an area that has barely declined I think it is pretty much a waste of tax money. 

The places were property hasn't dropped that much tend to be the places that are quite expensive. So giving someone a $8000 tax credit to buy an 800,000 probably isn't going to be the motivating factor, that's only 1% of the purchase price.

But you are right "free money" is never useless from the perspective of the person that is receiving it.

[henryinma]

There's actually income limits of $75-95k for single and I believe $150-$170 for couples. So people who can afford to buy 800k homes probably won't qualify for the credit.

If everyone qualified for the credit, I can see your point, but in the current bill, they said it reduced the cost from about 39 billion to between 3-5 billion. That sounds like only about 1/5 of the people that would have previously been able to access the 15k is now reduced to 8k for first time homebuyers. Therefore raising the prices has the effect of reducing the demand. So obviously this doesn't raise prices.

You'd be surprised at how little money can be a motivating factor. Purchases over 500k can get hung up over 1k of money and deciding who's going to pay.

[phlemboy]

What would qualify as first time homebuyer? I bout my house in 2001 and I think at the time it was defined as someone who hasn't bought a home in  5 or 10 yrs. I can't remember the exact # but there was a time limit.

[NCREI]

From CNN:

Homebuyers: First-time homebuyers who purchase this calendar year get an $8,000 tax credit which does not have to be repaid like a similar measure last year. This phases out for people making more than $75,000 individually or $150,000 jointly. "First-time homebuyer" is defined as someone who has not owned a home for the past three years. Cost: $6.63 billion.

My question is:  Can a real estate investor trying to sell a house to a borderline buyer with little down payment money help the buyer get approved using this tax credit directly or indirectly?

[henryinma]

About the only way that would work is if you wrote a seller second for the 8k and had a balloon payment where they would pay it off once they got their tax refund.

[sammydy]

     There is no real way to reap the benefit of the $15,000/$8,000 credit other than if you happen to be selling a house that you own right now to a qualified buyer.  If that happens to be you, congratulations on your free, albeit indirect, government money.

     For the rest of us though the end effect of this credit will be to artificially inflate or prop up the current value of a house (to a qualified buyer) by the credit amount.  Once this credit expires in a year those houses will promptly fall by the credit amount, in addition to whatever they were already going to fall since prices are crashing.  As a result, the credit will end up being a free loan towards your down payment to be paid back by an expected future loss on the property; thereby ensuring that even more future buyers have little to no skin in the game, thus helping to ensure defaults remain high.  If the credit does have to be paid back the effects are even worse to the buyer are you are ensuring them a real loss equal to the credit amount.  For those who buy nearby the property without the credit this will mean they will likely overpay by the credit amount for their own properties (because of the way houses are currently appraised) thus ensuring them at least a loss equal to the credit amount once it expires.

     Scratch that, there is one way you can take advantage of this credit.  If you can somehow manage to buy a property at a LTV higher than 90%, during this year, you can get a 100+% loan on a property.  Say welcome back to the bad loan practices of the last few years, this time with government help.

     You government at work.

[investorman]

The government has always been in on the racket...They created the mess with low interest rates, the "ownership society" and virtually no regulation. In CNBC's "House of Cards" program..Alan Greenspan explains how the government didn't want to get in the way of subprime because  it would be viewed as thwarting growth and profits .

Home ownership was rising to new levels and politicians didn't want to get in the way of that. This is what happens when you have too much too soon..and something that is too good to be true aka the belief that homes will appreciate and never go down until eternity.

We just have to find ways to turn the "doom and gloom" to our advantage.