Sunset the 1st Time Buyers Tax Credit

Ok, I hear you, I hear you - blog more!! Sorry, but I need a good topic and I was busy as hell for a while.

I say, let the first time buyers tax credit sunset, and go away. Why? What have we done?? For selfish reason I say "keep it going"!! However, we have now created a false market that will be directly impact 2010 and beyond. Here is how I see it. Recession is over, but we are looking at a jobless recovery. What that is going to create is more foreclosures. Those foreclosure will not hit the market until next fall, because folks are now just starting to default on their mortgages. Foreclosure is a 12 month process, and those who have not found work after losing their job this year, are the ones who are defaulting. We are a nation of spenders, instant buyers, just add water. What I'm saying is, as a nation we don't save, and in hard times we have nothing to fall back on. The only silver lining is, only 50-60% of the stimulus package has gone out, so in 2010 there will still be a flood of capital in the market place. However, companies have already cut back and they have the worker right where they want them. Working harder just to save their job! I bet if a productivity study was done right now, productivity would be way up!!

Everywhere I read, see on TV, or hear on the radio says the jobs are the last thing to recover after a recession. Why? Because companies go back to the basics and don't take the risk of growth. Some companies see these times as opportunity to get lean, cut excess, because they have an excuse. Blah, blah, Jason you are talking about the economy and not the housing market. This all effects housing market, but this is part of why I say let the First Time Home Buyers Tax Cut sunset.

Here is why:

1) The housing market, for the most part, has reset back to "normal" levels, and equity should be on a steady slow growth. Not what we had five years ago when we where seeing 10%, 12% and plus growth a year. That was a false market that was going to crash at some point, and it happened to be 2008-09.

2) The tax credit has created a same type of false market. Lots of first time buyers, but in talking to Loan Offerers, they are already see a growth in defaults for loan originated in 2008-09. I would bet that is coupled in job loss. My point here is, the tax credit has created this market of buyers, but I have to say that for the most part they are all used up. Buyers are still out there, but I'm hearing less and less about new buyers. This false market, first time buyers, will dry up and the 2010 market will contract.

3) Inventory is down, good inventory is gone, and the good new inventory won't hit the market until spring. Foreclosure inventory will rise next summer/fall, but before that look for the Short Sale market to increase next year as well. That sucks!! Short sales rarely, rarely close!! I had three short sales go "boom" right before my eyes..I couldn't do anything about it.

The saving grace?? The Federal Reserve!!

If the Fed keeps the key interest near zero, the rate at which banks lend to each other, that will keep the 30 year fixed rate down. Now, couple that with lower prices due to market correction, and buyers will still be able to purchase homes. The barrier to entry, down payment, is what concerns me as a Realtor. Buyers really don't have down payments, remember, we are a nation of spenders - not savers.

However, if we don't sunset the tax credit this year we will continue to create a false market that will crash even harder in 2011. If we get the foreclosures in the fall of 2010, coupled with a new deadline for a tax credit that runs through 2010, the housing market will crash HARD in 2011. And we are right back where we started. For the overall health of the housing market, economy..sunset the tax credit. It did it's job, now it is time to move on to a thin market, but a REAL housing market.

The selfish part of me says "NO!!!", but the practical side says "it's time for it to go".

Case in point.....Cash for Clunkers!

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Closing Window

As you may know, the government is offering an incentive for first time buyers in the form of a tax credit valued up to $8000. I'm not going to go into detail on the program, but what needs to be said is this, the clock it ticking!

One of the things people don't know is that you have to close on your home before November 30, 2009 to receive the tax credit. I have heard people say "well I just need a purchase agreement before the deadline", ahh NO! You need to close on your new home, and be living on the property before November 30th or you can not file for the tax break.

I have been telling all my buyers that they need to buy before September if they have any hope of closing in October or first part of November. Because I am predicting that November will be one of the biggest real estate months ever!! Closing will be at a record high, and many folks will miss out because of it.

Why?

There are a few x-factors no one is talking about:

1. Starting July 30th the government is implementing Housing and Economic Recovery Act (HERA). HERA amends the Truth in Lending Act (TIL) making lenders disclose any and all fee before they are collected. This is a good thing, however, any change to the TIL within four days of close means that the transaction will have to wait an additional four days to close. What can change the TIL? Unlocked rate, change in loan amount, product change (change in loan type), rate re-lock due to market improvement, change in closing date, or changes to fees inclusive of settlement agent fees.

2. The other factor is the financial institutions themselves. The current backlog will only increase the waiting times to close in the coming months due to the increased volume. Meaning, as the tax credit is expiring, more first time buyers are going to buy looking to close before November 30th.

These factors are going to make November the craZiest month for closings this year. Therefore, I am telling all buyers, buy NOW! Don't wait for the backlog and miss out on the opportunity to cash in on this one time offering by the government. There is hope that the government may, may, extend the tax credit into next year, but that is not for sure. So far it is just a HOPE!

At one point there was some talk that you could borrow the tax credit upfront as a loan and pay it back when the credit is issued. We know that is happening around the country, but that will not happen in Minnesota. Why? Because the organization that could offer the loan can not offer it. Why? Because their bond is short funds to accommodate all the potential users. Simply put there isn't enough monies to go around. This is unfortunate because that would put even more people into homes that can afford to make the payments, but have a barrier to entry, down-payment.

My hope is we figure out more ways to incentivize buyers to continue to buy, however, the national numbers do not reflect this market. The five state region is holding up right now, and there is no signs yet to say different.

These are my thoughts, but offer me yours.

Follow my continues thoughts on all things real estate at www.twitter.com/edinarealty and I will post more updates. You can also find me at www.jasonmoore.edinarealty.com.

High Maintenance, WOW!

I know, I know, where have I been?  Great question! Busy!

Since the last time I blogged a lot has happened, but I'm going to touch on one issue of mine recently.   

High maintenance clients and agents.  Now, I'm a strong personality, but recently I have worked with other agents who are strong personalities too.  No harsh words have been spoken to one another, I'm professional, but come on people!!  There is no need to call me 8-9 times a day for a piece of paper!!  If I say I will get it to you, I will!!  Although I have had a few crazy deals going on, more on another blog, don't be high maintenance.  Don't demand phone calls from someone 6-10 times a day, because you don't trust someone.  Allow your agent, or other agents the benefit of the doubt that they will handle their business.

As a client understand that you are not the agents only client, and there has to be acceptable time for the agent to return a call or email.  Now, we know that there is a time stamp on all communications.  We get that.  However, if we are with another client there is no need to send more than one communication.  Texting, emailing, and repeatedly calling does not get you what you want sooner.  It just makes your agent, who is trying to help you, crabby!  We take that crabby home, then my wife is crabby, my kids are crabby, and the dog is crabby! 

Blah...

Keep it easy, know what you want, but understand your agent is working with more then one client at a time.  Please note that when we are with you, then you get all of our attention, and the same would go for the other clients too.  They deserve all of our attention when we are with them!

As for agents, come on guys!!  We know how it is, we are not in the office very much, because if we are we don't have enough business.  Therefore, don't ask for a document you know I don't have in front of me, and demand it in an hour.  Rude!  I had an agent ask if I would tell my buyer to change his financing because he didn't think the property would pass FHA financing. 

What? 

Come on guys, that is not your place to make a request like that!  Don't be concerned about what the buyer can, or can't do, but make the deal and stick to it!!  Don't go trying to make it out the way you want it to go because of your fears!  Trust the process!

Alright, off my soapbox.

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Check out my new listings at:

www.jasonmoore.edinarealty.com/3683884

www.jasonmoore.edinarealty.com/3676196

www.jasonmoore.edinarealty.com/3678140

Beauty Contest

Working at the office, chatting with one of my fellow agents, we started talking about sellers.  I recently was in a multiple bid situation that my clients lost out on.  Now we were fine not getting the house, but it sparked a thought!  

This home my clients lost was very nice, very nice, however, it was small and had no upside.  Meaning all the square footage was used, and it was not going to be the family house they were going to need in 4-7 years.  Now, we saw a lot of dogs, and I mean dogs, before we walked into this house.  But there was no reason to overpay for a house just because it was nice, and updated.  The home didn't have any upside, we could not see where we were going to put in sweat equity.  The square footage was all used, it had a two car garage, and the yard was not very big.  Plus there was no room in the basement.

However, this home sold for more then the asking price.  What?

Back to my conversation with my fellow agent.  We were talking about listings that were opportunities for us, and he said "watch out, it's becoming a 'Beauty Contest' out there" and I almost fell out of my chair.  The house my clients lost out on was nice, and the one they bought was nice too, but has upside for improvements.  No fancy stainless steel appliances, just a solid foundation, well kept home, and a little more off the beaten path. 

When my clients start their family some day, their house will be able to grow with their family. Not so much with the overpriced house they lost out on.  You see as a Realtor it is my responsibility to make sure I get the best possible deal for my clients, and listen to their needs.  By listing to their needs, I can fulfill them to the best of my ability.  

This turned out to be a win/win for everyone.  The folks that bought the overpriced house, in my opinion, are happy, and my clients are happy with their purchase.  However, this taught me that it is a "Beauty Contest" when selling and you have to be careful that picking the winner may not be the one that is the flashiest.  But the winner may be the one with personality.

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What if I'm a seller?

What can sellers do in this market? Simple! Price your house right! Price is the key to selling plan and simple! We all think that our house is worth more then it may be, but let trained professionals determine your true market value.

Often times I hear buyers, or buyer representatives, say "did you know the tax value is only..." and often times that may be true. However, remember that the cities tax value is what your property taxes are based off of, but it does not reflect your MARKET VALUE. These are two very different things!

Market value is determined by having a professional Realtor do a market study. That will give you true market value! Stay in the range and your home will sale, get out of the range and you could be chasing your property down the market.

In toady's market the government is giving the first time buyers the leg up buy lowing rates to an all time low. Therefore, if you are a seller there will be buyers, but only if your price your house to sell.

Follow this conversation at www.twitter.com/edinarealty as I will be offer new thoughts as the week goes on.

New to the game?

Searching for a new home can be trying, hard, and sometimes disappointing. You have to have a strong since of who you are and what you are truly looking for in their new home. First time buyers don't know what they are looking for until they walk into it, however, with the growing use of the Internet makes looking easier. First time buyers walk into more homes on average then the second or third time buyers. Why? Because they really don't know what they want and need to see as many possibilities to make up their minds:

Qualify yourself as a buyer:

1. Do you have your financing in order?

*Have you spoken to a loan officer to know what you qualify for?

Nothing Realtors hate more is a showing houses to unqualified buyers. What do I mean? We do not like show homes to those who do not know how much they can afford! It wastes every ones time. That is why I say get your financing first!

2. Do you know what kind of home you are looking for?

*One story?

*Two story? and so on...

*How many BR's and BA's do you need or want? Can we get that in our price point?

3. Where do you want to live?

As Realtors we are not able to "Steer" you to an area, you have to discover that on your own, but most already know where they want to be.

Now these are just some of the things that a good agent will ask you, I have a lot more, but blogs are meant to be short and sweet!

If you qualify yourself as a buyer then you can find that property you are looking for, or see the one you have your eye on. However, don't forget to be prepared to buy because it easy to want to buy, but harder if you are not prepared.

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Water Logged

Once, twice, three times is the charm...right? Well not always. Buying a home can be work! You look and look but don't find what you are looking for. Offers are made and but not accepted and you feel as if you are not going to get the home you seek.

In today's market there is currently eight months worth of inventory. That means that if no new listings came on the market, we would have eight months worth of properties. However, spring is near and a flood of new listing will start to show up. So, for those first time buyers don't worry, what you are looking for is out there. Or on it's way to market.

The deals right now are the best deals, because these are homes that need to sell or sellers who want to sell. Once spring comes I expect prices to be some what inflated. Why? Because there will be less homes for sell do to the fear of a poor market. Don't be surprised if the stats show new listing drop for a few weeks, but the market in general is bouncing back. I see the numbers fall in some places, but hold in others. Therefore, if you are first time buyer you are going to drive this years market. But the numbers bear out a strong third of fourth quarter bounce back. Now I could be wrong, but all the signs point to recovery sooner rather then later.

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Wow, did you just offer that?

Right now first time buyers are getting the deals of a life time, however, don't forget that hard working people everywhere put a lot of work into their homes. Therefore, those sellers shouldn't be short changed. I recall when my wife and I bought our first home in Kingfield. It was a two bedroom with a lot of upside. She wanted the hardwood floors and such, and I wanted a house that we could improve over time. The market was red hot at the time and we needed to pay full price just to get the home. Over time we had a vision of what we wanted to do to improve the home, but no money to do the work. As we got more comfortable with our payments we began to work on our home, thinking of resale value. Also, we needed more space.

When we had our children, we quickly discovered we needed to complete our basement. But even when we added 450 sq. ft. it wasn't enough. We had to move, but what is fair market value? We sold at the start of the down slide, and lost some value. But we sold. The x-factor is we still sold at a good price, and with appreciation.

Today's market is more of a buyers market, but lets not forget that homes that are not foreclosures and short sales still have a fair market value. As a real estate agents it is our duty to find that fair market value and work with our clients. As homeowners we put in a lot of sweat equity, and it needs to be reflected in the pricing of a home. There are concessions in every deal, but be mindful that it is not the sellers responsibility to make up difference for the buyer(s). The difference in price for what work the new buyers want to do to the home. Buyers have to do some of their own sweat equity too.

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The Perfect Storm

Every thirty years or so there is a perfect storm of events, and this is the year for real estate. This is 'Perfect Storm' in real estate. Low mortgage rates coupled with affordable home prices means there is no better time to buy, but is it a good time to sell? Yes! Why? Well if your home is priced right there are buyers out there waiting for you as a seller. If you are holding a solid equity position, have time, and price flexibility your home will sell.

The mistake now is not being flexible with your price, but still thinking of your house as a cash machine. This isn't five years ago, and overall home prices have fallen. Think of a sell in this market as getting your house off the market as quickly as possible. What does that mean? Price your house at market, or slightly below market and you will sell. Lots of buyer out there ready to buy, but they better hurry.

Outlook for 2009 to me looks to be any home priced under $200K, will be the hot market. As more first time buyers come to the table don't lose out trying to make additional $10K. Take a hard realistic look at what your home is worth and price it right!

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